IN THE MATTER OF INTEREST ARBITRATION BETWEEN CITY OF PORTLAND, OREGON and PORTLAND POLICE ASSOCIATION. IA-06-03.

I. INTRODUCTION

A. Background

This matter came for hearing pursuant to Oregon law, and the arbitrator complied with all statutory and administrative requirements in hearing and deciding the dispute. The parties waived any legal requirement that the arbitrator submit a decision within 30 days. Having issued over 3,000 decisions gives a vantage point from which to describe this particular proceeding as a hard-fought, adversarial confrontation between two equally determined protagonists. They participated with equal vigor in advocacy and acquitted themselves with a high degree of professionalism. The magnitude and determination of the confrontation are exemplified by the parties spending a day on discovery issues, filing substantial briefs on technical matters of discovery, and, finally, needing an extensive discovery order from the arbitrator. Despite the arbitrator's attempt, pursuant to ORS 243.746(3) to send the "discovery" aspect of the dispute to the Oregon Employment Relations Board, the Board declined and sent the parties back to the arbitrator to resolve the matter pursuant to ORS 243.706(3)(a)(B).

The parties were expertly represented by Ms. Lory J. Kraut, Ms. Stephanie Harper, and Ms. Anna Kanwit for the City, and Mr. Will Aitchison for the Association. Hearings occurred on September 12, 13, 30, 2003; November 7, 8, 11, 12, 14, 18, 26, 2003; January 20, 21, 22, 2004; February 5, 9, 11, 19, 2004; and March 1, 2, 5, 31, 2004. Various court reporters for LMS Court Reporting reported the proceedings for the parties and submitted transcripts in 22 volumes. Although the arbitrator began studying the evidence weeks before closing the record, it officially closed on April 13, 2004 after receipt of Volume 22 of the transcript.

The arbitrator's theory that extensive sharing of data in interest arbitration helps parties engage in settlement negotiations proved to be unworkable in this case. The dispute consumed 21 days in hearings as the parties submitted almost 200 pounds of evidence (as calculated by an incredulous son of the arbitrator). One party spent a work day and a half closing orally, while the other submitted a written brief of 165 pages. They accumulated approximately 5,600 pages of transcript and presented literally thousands of pages of documents in 18 volumes. The parties and the arbitrator quickly began using hand trucks to deliver and remove evidence each day of hearing. While certainly not the most extensive interest arbitration proceeding (Michigan had one of 89 days), it was unique in the Northwest for its length, the gargantuan record, and the intensity of advocacy.

B. Nature of the Process

It is important to understand the context within which such a colossal record must be examined. Statutory criteria set forth in Oregon law provide the total universe for assessing evidence submitted to an interest arbitrator. The law requires an arbitrator to examine the evidence and select the packaged proposals of only one party as those most compatible with statutory criteria. The view of the legislature is that limiting the arbitrator to a single unmixed package best serves the interests and welfare of the public.

Remaining sensitive to the nature of the interest arbitration process, especially to the Oregon design, helps an arbitrator assess which set of proposals complies with Oregon statutory criteria. A departure point is the moral component of the statutory scheme. An arbitrator has a social obligation to the community to do no harm. Without regard to the virtue of desiring to make the world a better place, an interest arbitrator at a minimum should not make it a worse one. Thus, a legitimate consideration in overlaying proposals against statutory criteria is to ask which party's Last Best Offer has a higher probability of harming a community. It is an obligation of an arbitrator to determine whether, but for selecting one set of proposals, some harm to the community would not have existed.

Another factor in understanding the nature of the process is for the parties, the arbitrator, and the community to keep in mind that, while interest arbitration is socially useful as a means of avoiding work stoppages among public safety personnel, it, nonetheless, is not nearly as effective as face-to-face conversations between the parties, as contrasted with presenting evidence to a third party neutral. It is in face-to-face bargaining that parties most effectively communicate their concerns and objectives, and nothing an interest arbitrator might accomplish is ever as directly responsive to needs of the parties and the community as is an agreement the parties, themselves, negotiate. Because the public should not be subjected to the intolerable burdens of work stoppages among public safety personnel, interest arbitration represents sound public policy. At the same time, interests of all parties, including the public, are best served at the bargaining table. Although scholars and practitioners generally describe interest arbitration as an extension of the bargaining process, the harsh reality is that interest arbitration typically is an adversarial method of dispute resolution in which the parties no longer control their own destinies, even with the Oregon approach.

C. The Oregon Design

Last Best Offer interest arbitration as codified in Oregon law is a legislative attempt to impose restraints primarily on arbitrators by mandating that more control remain with the parties. In states not following the Oregon design, an interest arbitrator generally produces a decision containing some contract terms sought by one party, some proposals desired by the other party, and a few contractual provisions representing a compromise fashioned by the interest arbitrator. Under the Oregon design, one party prevails; and all efforts of the other party are for naught. After an interest arbitrator in Oregon weighs the evidence and makes a selection, no further negotiation occurs between the parties with regard to terms for a contract. The arbitrator's selection of only one party's package is in no sense advisory and enjoys the full force of law. Even if a party in retrospect wishes that more serious consideration had been given during bargaining to proposals from the other side and a more vigorous effort had been made to negotiate, it is too late. Selection of one party's Last Best Offer by the interest arbitrator brings the process to a conclusion. The parties are then bound by a contract that constitutes an instrument of government.

Traditional interest arbitration has been used in Britain and the United States for at least 150 years, and Last Best Offer interest arbitration has a lineage almost as long. (See 29 Monthly Labor Review 16 (1929).) Oregon began with traditional interest arbitration in 1973 and switched to a Last Best Offer approach in 1995. The underlying theory of Last Best Offer interest arbitration is that it encourages face-to-face negotiation. The Oregon design of Last Best Offer arbitration is intended to increase mutual pressures on the parties to be realistic at the bargaining table on the assumption that, should the parties be unsuccessful at the table and go forward to arbitration, they will be relatively close in their positions so that neither will be much harmed, no matter which side prevails. Fear of the last step in the process is supposed to draw them closer and closer together.

A distinction between traditional interest arbitration and the Oregon design is that Oregon limits an interest arbitrator's freedom to fashion compromises between conflicting proposals. An essential element of Last Best Offer arbitration in Oregon is that it is intended to drive the parties closer together in bargaining so that they can avoid the "rocks and shoals" represented by an arbitrator's selection of only one party's package. As one well-regarded management negotiator observed:

Although with the final offer package procedures unions generally remain in a win-or-tie situation and employers remain in a lose-or-tie situation, the potential magnitude of either wins or losses is reduced dramatically. This assumes, of course, that the parties will indeed negotiate closer to their bottom lines prior to actual arbitration. (See Mills, LERC Monograph Series, Issue No. 14, 137, 138 (1996), emphasis added.)

Implicit in Last Best Offer arbitration is a hope that parties will negotiate to a point so close that they, themselves, will resolve their dispute.

The Oregon design of Last Best Offer interest arbitration is distorted if it fails to encourage more thoughtful bargaining. The underlying theory is that the fear of having a party's entire Last Best Offer rejected will provide an incentive for both parties to negotiate realistically and to compete with exchanging the most reasonable offers. The legislature assumed that parties would bargain in good faith to find mutually acceptable common ground, in part, to avoid the risks of the arbitration process. A negotiated settlement permits parties not only to avoid the expense of preparing a case for arbitration but also costs of the actual arbitration process itself. Even in a case of limited duration and with few issues, these preparation and presentation expenses can be enormous. Of course, not resorting to the process also allows parties to retain complete control over their own destiny.

In theory, the larger the potential cost of an unfavorable result from an arbitrator, the more inclined a party should be to reach a negotiated settlement. The assumption is that parties will have done a cost benefit analysis and will have concluded that it is in their best interest to estimate the costs of using the process and, then, to distribute those resources as a part of a negotiated settlement in an effort to avoid resorting to the process. On occasion, of course, political expediency might require using the process despite the risks. To the extent parties fail to move closer together at the bargaining table, the risks of arbitration increase.

The point is that, when the Oregon design fails to work as intended by the legislature, parties generally become far more adversarial in their approach to each other. Instead of competing at the bargaining table and in any Last Best Offer packages to make the most reasonable offers, an adversarial instinct may take over and cause parties to lose sight of values inherent in an equitable negotiated outcome. The adversarial instinct tends to stifle any inclination to problem solve. When the process fails to work, parties, instead of moving closer, may move farther apart in their Last Best Offers, despite the fact that the system is designed to drive them closer together.

Implicit in the Oregon design is a theoretical assumption that parties will reduce the risks of not having their proposals selected in arbitration by moderating unsupportable positions in negotiation and in a Last Best Offer package. The Oregon design fails when parties for whom Last Best Offer interest arbitration is the final step recognize no incentive to make reasonable concessions during bargaining or do not draw closer in the final packages submitted, first, to each other and, then, to the arbitrator. Unless one party is simply being recalcitrant and extreme at the bargaining table, the two Last Best Offer packages should look reasonably similar; and the parties' respective positions theoretically should be closer by the time they reach arbitration than at any other time in the negotiation process. The assumption is that, if a party is merely being recalcitrant, an arbitrator will identify that fact and select the other package. If parties are reasonably close by the time they arrive in arbitration, the evidence must be weighed in terms of the public interest; but the impact of either package on the parties should not be startling.

D. Uniqueness of a Police Interest Arbitration

Because the interest and welfare of the public as well as significant labor/management concerns are affected for years, all interest arbitration proceedings are important. But a police interest arbitration is like no other. Arbitration for police personnel is different from all other interest arbitration in the public sector because of the role law enforcement plays in a community. The community exists because it satisfies needs of its members. Living in a community enables citizens to advance individual and collective values. As an expression of basic human needs, a community has certain responsibilities for helping its members achieve their goals. The quality of social living in a community depends, in large part, on the extent to which the community functions to help facilitate social goals.

Every community strives for a strong economic structure, and the kinds of jobs available to citizens uphold morale and give quality to daily life. A major task of community leaders is to help establish and maintain a healthy economy. With monies from a healthy economy, a community is able to provide basic functions that insure the vitality of fundamental social systems. Functions such as schools, health services, and essential governmental services help define the essence of a community and enable it to function as a part of a democracy. One essential governmental service is law enforcement. Police personnel serve as an emblem of safety that allows an economy to flourish.

In the early, less complex days of the United States, the community generally did not assume responsibility for a formal policing function. The peace was kept informally by citizens on duty serving the community or by village elders, parents, and clergy. A Boston politician as late as 1815 stated:

If there ever comes a time when Americans have to have in their cities a paid professional police force, that will be the end of freedom and democracy as we have known it. (See Watson, Selected Readings, 107 (1967).)

Citizens in the United States later relied on justices of the peace to keep order, and paid police officers emerged not until the nineteenth century. Much has changed since the seventeenth century when night watchmen made their hourly rounds in a city and all males over 18 were expected to serve in the rotation.

Law enforcement personnel today, almost more than any other essential governmental service, are expected to uphold and reflect community values to a diverse citizenry. If people were perfect, law enforcement would be unnecessary; but the harsh reality is that law enforcement provides a civilizing influence in a community like no other group of public employees, especially as other socializing institutions have grown weaker or become dysfunctional. Large or small, democratic or authoritarian, communities need law enforcement. In a democratic society, however, law enforcement must advance the goal of protecting life and property while also fostering democratic values of personal freedom. Having the official power to use reasonable force to balance these social imperatives places law enforcement in a unique position to receive both praise and damnation.

No other governmental service has the immediate symbolic power that is held by law enforcement. A police officer is a front line representative of political power. The average citizen is daily far more conscious of law enforcement in a community than, for example, a city council or a planning commission. A police officer on street patrol performs his or her duties in a "fishbowl" and, rightly or wrongly, serves as a representative of the political system in a community. He or she is expected to reflect cultural values of the community and, along with teachers or firefighters, is held to a higher standard of trust than many governmental employees.

Modern police departments have numerous opportunities to represent official power in a community as a result of the diverse functions now performed by police officers. Their traditional role of protecting life and property has morphed into performing a wide variety of community functions, and an experienced police officer is now expected to be expert in human relations, race relations, domestic conflicts, traffic control, accident investigation, disputes between warring youths, and to have a general knowledge of basic principles of equal justice on which a democratic political system is premised. These varied functions do not call for a collection of ideals a community hopes to find in its police personnel. Citizens, rather, expect law enforcement officials to be immediately ready to handle widely diverse situations and to do so with consummate skill. Whether or not an officer exhibits the requisite skill while working in a "fishbowl" environment is pivotal in the public's perception of law enforcement as a good or bad representative of community values. A negative perception increases a risk that voluntary law observance will be undermined and the vibrancy of a community harmed. Public confidence in democratic institutions is essential. Few other governmental services place employees in so many significant job performances that can enhance or undermine public trust in community leaders generally.

Interest arbitration involving police personnel is unique, in part, because no other public sector workforce but law enforcement personnel can build or destroy public trust as instantly through their use of individual discretion. Police discretion is at the heart of law enforcement and has a direct impact on the daily life of average citizens. Not all infractions of the law lead to a citation or to an arrest, and police officers are charged with using reasonable discretion when enforcing expectations of the community.

If police personnel enforced the letter of the law in every conceivable situation, the court system would collapse or at least have to change; and average citizens would be outraged by such strict enforcement. Officers are expected to use good judgment and commonsense in performing their duties, and their use of police discretion is expected to reflect community values. While individual performance failures must be punished or employees retrained, no mathematically precise road map exists making clear how law enforcement personnel should handle all the nuances of situations that arise in our fast-paced, highly complex society.

Few work forces are so persistently vulnerable to public criticism and career obstacles due to errors in the use of individual discretion. Other public employees are generally not targeted for harm by segments of the population. Some criminals, however, believe they gain respectability if they can boast of harming a police officer. In that environment, police personnel often must make quick discretionary decisions A wise use of discretionary power is an essential skill of a police officer, but no definitive policies, guidelines, or rules can ever remove all the ambiguities confronted in the daily performance of regular duties by police personnel. Basic precepts and departmental guidelines help, but police discretion is inherent in the performance of law enforcement duties. The competent use of police discretion in the hour-to-hour performance of regular duties, potentially with deadly consequences, is a unique characteristic that sets apart law enforcement personnel from public employees performing other governmental services. It is a consideration that merits weight in an interest arbitration, and some evidence suggested that the Employer failed to do so in this case.

E. A Context for the Dispute

These parties have negotiated collective bargaining agreements with each other for approximately four decades. Their contractual relationship began even before enactment of the state public sector collective bargaining law. Because the last labor contract between the parties was due to expire on June 30, 2002, they began exploring a new collective bargaining agreement in January, 2002. Bargaining continued for over a year before the parties commenced mediation in April, 2003. Negotiators resolved some differences, but agreement on major economic issues eluded them.

Using the statutorily mandated system of dispute resolution for public safety employees, the parties exchanged Last Best Offers on August 29, 2003 and discontinued formal bargaining as they prepared to commence interest arbitration. Hearings began on September 12, 2003, and ultimately the record closed on receipt of the final volume of transcript on April 13, 2004. It is a tribute to the stable relationship between the parties that this is only their second excursion into interest arbitration, the first having occurred in 1984 pursuant to a "wage reopener" collective bargaining provision.

This is a case in which the Oregon design of Last Best Offer interest arbitration did not work. The availability of Last Best Offer arbitration is intended to promote settlement. When Oregon lawmakers in 1995 injected Last Best Offer arbitration into the public sector bargaining process, the legislative intent was to create a system that drives parties closer together by limiting an arbitrator's discretion. By denying an arbitrator any opportunity to "split the difference" between conflicting proposals, negotiating parties are expected to be drawn closer together with compromised proposals so that an interest arbitrator will view one party's proposals as most reasonable and, accordingly, select them. No doubt the legislative hope was that Last Best Offer interest arbitration would even make interest arbitration unnecessary.

Instead of the risks of arbitration drawing the parties closer together in this case, the opposite occurred. Last Best Offer arbitration in this case widened the gap between the parties and drove them further apart. For example, the Employer's Last Best Offer stripped 14 ostensibly permissive provisions from the parties' prior labor contract, including some provisions that were decades old. As the City's negotiator explained, "We want that last best offer to convey risk, . . .the risk of losing something that they (bargaining unit members) hold dear." (See Tr. 1/21/04, p. 124.) The Association's decision to move to interest arbitration widened, not narrowed, the gulf between the parties. (The City made clear its position that the issue of permissive language in the parties' agreement is not within the arbitrator's jurisdiction. (See City's Posthearing Brief, p. 165, ftnote 549).)

When the Oregon arbitration scheme fails to work as designed, it gives a proceeding an even more adversarial cast. Data collection and verification in interest arbitration are almost always a point of contention. When a proceeding has a heightened adversarial flavor to it, resolution of data disputes becomes a herculean undertaking. When, as in this case, parties fail to agree on relatively objective points, such as the number of days of interest arbitration hearing or the number of pages in the transcript, it suggests that more nuanced agreements about data will be virtually impossible. For example, when it comes to highly complex matters such as calculating the value of a pension or agreeing on the amount of an employee's total compensation, hope of reconciliation is lost. The problem in this case was compounded in the hearings by scheduling witnesses so that direct and cross-examination of some appeared on different days, often separated by testimony from a number of other witnesses. Such logistical problems and conflicts about data mean that a decision-maker cannot merely make a choice and rely on data submitted by one of the parties but, instead, must attempt to replicate many of the parties' respective calculations in an effort to determine who is accurate and who is being most reasonable. The parties, however, overcame some of the problems by submitting in one case an extensive, exceptionally useful post-hearing brief and in another, an equally helpful oral argument.

Data collection and verification proved to be a considerable issue in this case. Data collected for interest arbitration is virtually always in a permanent state of dynamic change. A chart that attempts to describe wages or working conditions for a comparable community is more like a snapshot than a motion picture. Limitations of such data must always be kept in mind. In this case, the parties engaged in data battles at a level of detail and sustained specificity that is uncommon in such proceedings. More data are generally good, but a record that is too highly detailed and full of conflicting testimony from expert witnesses runs the risk of concussing a decision-maker with an overburdened record. For example, the parties at one point had an extended disagreement over whether someone had a "belief" about or, instead, "understood" prior events in a particular way. They examined closely the difference between aggregate and specific stop-loss insurance and loss ratios with and without retirees in the mix. Scrutinizing every document line-by-line, the parties traded furious charges about data flaws, inaccuracies, miserable evidence, made-up numbers, absurd positions and the general unreliability of each other's information. (See, e.g., Association's Closing Argument, p. 704 and City's Post-hearing Brief, pp. 100-107; 138-139.) At some point, such an approach may not be in the best interest of the parties; and it might be more efficient merely to submit source documents and move forward. Intense mutual concerns about the accuracy of data and methodologies used to extract data were significant in defining the context of the dispute.

F. Political Structure

Police functions in Portland are wholly controlled within the city's political structure. Every aspect of the Police Bureau's operation is fully answerable to established political authority, including operating efficiency, financial management, and accountability of individual employees for the way they use their discretionary authority. Citizens exert their influence on the Police Bureau through elected officials and formal administrative channels.

Five nonpartisan commissioners are elected to four year terms, and commissioners constitute the City Council. The Mayor not only heads the Council with regard to administrative duties but also heads the Police Bureau. The Chief of Police functions under her direction and is appointed by her. The electorate considers the Mayor to have ultimate responsibility for the Police Bureau, and she views public safety as a basic responsibility of her office.

The Chief and his three assistant chiefs direct day-to-day operations of the Police Bureau. The Bureau is organized into three branches, namely, services, investigations, and operations. A stable financial underpinning supports these operations. The City enjoys an Aaa credit rating from Moody's and has garnered awards for its prudent fiscal management. The City operated with a total net budget in 2003-2004 of approximately $l.74 billion. Police operations are funded from the General Fund.

Despite decreasing staff levels, the Police Bureau has managed to increase productivity and, at the same time, to receive generally good reviews from citizen evaluations. In 1994, 70% of those surveyed ranked police service as "good or "very good"; and in 2002, 88% felt safe walking alone in Portland during the day. Although public perceptions are cyclical and can be inflamed by uneven press coverage, a general fear of crime in the City is declining. In 1994, 24% of citizens viewed crime as having increased in the last year. In 2003, only 16 % of those surveyed held the same perception. During this general time period, dispatched calls increased. From 1994 to 2002, self-initiated activities by Bureau personnel more than doubled. From 1996 to 2000, arrests per officer increased by 7%. From 1996 to 2000, the total calls handled per officer rose by over 10%

With fewer personnel, Bureau management increased productivity. In January of 1997, Bureau personnel totaled 1,315 employees. (See City's Exhibit E-I 60, p. 28.) Today, the Bureau employs only approximately 1200 employees. (See Employer's Post-hearing Brief, p. 4.) In 1996, 1,007 sworn personnel worked for the Bureau performing law enforcement duties for 503,000 people in the City. In 2004, only 944 sworn personnel work for the Bureau while performing duties for a population of slightly less than 540,000 citizens. (See City's Exhibit E-J 43, p. 2 and Association's Exhibit 7-26.)

It is within this political context that Last Best Offers of the parties must be tested against statutory criteria. Which set of proposals will better serve needs of the total community, remembering the underlying goal of governmental service to preserve democratic ideals. Which set of proposals will increase operating efficiency while assuring the accountability and responsibility of law enforcement personnel to the electorate? Which set of proposals is most responsive to concerns and needs of the community?

II. TENTATIVE AGREEMENTS

While the parties prior to interest arbitration failed to reach agreement on major issues such as wages and health benefits, they, nonetheless reached a number of tentative agreements. To memorialize those agreements and to avoid confusion in compiling their agreement, it is prudent to list tentative agreements reached by the parties during bargaining. They are as follows:

23.4 In the case of involuntary transfer and/or assignment, the seniority of an officer shall apply immediately to the officer's choice concerning holidays and vacation. In the event of an involuntary transfer, the City shall accommodate the shift and/or days off preferences of transferring officers immediately, and shall not involuntarily bump any other officer for at least thirty (30) days from the time the bumped officer receives notice of the bump. The transferring officer may not use seniority to bump another officer's shift or days off until 30 days from the date of the written request.-

Article 24, VACATIONS

Delete 24.4:

No later than June 30, 2000, the Bureau shall arrange for a meeting with the Association to discuss court scheduling procedures. The Bureau shall invite to the meeting representatives of the District Attorney's Office, the Multnomah Public Defender's Office, the court system, and the presiding Circuit Court judge, and shall have present at the meeting a member of the command staff and the court coordinator.

Article 28, PREGNANCY, PARENTAL AND FAMILY LEAVE

PPA proposal from May 10, 2002

28.4 If an officer has qualified for family leave and has exhausted all other forms of paid leave, the officer may use sick leave in cases of a "serious health condition" (as defined in state law) in the officer's immediate family (as defined in ORS state law and Articles 48.4 and 50 Domestic Partners of this Labor Agreement). If the duration of the officer's family leave is longer than the amount of the officer's accrued sick leave for the duration of the family leave after using all other accrued paid leave. However, an officer may choose to reserve a total of 80 hours of combined compensatory and vacation leave for future use. In no event may an officer use sick leave under this section to extend family leave beyond twelve (12) weeks per calendar year.

Article 49, CONTINUATION OF CITY-PAID HEALTH AND WELFARE BENEFITS TO OFFICERS WHO ARE INJURED IN THE JOB OR WHO HAVE AN OCCUPATIONAL ILLNESS OR INJURY

49.6 An officer who has a non-service connected disability or injury is eligible to participate in City group benefits (medical, dental and vision) at City group rates until Medicare eligible, no longer disabled, termination, or they (sic) fail to make the required premium payment. Officers shall be responsible for payment of premiums including any administrative charges that the City is entitled to charge self-pay participants under federal or state law.

New Article, Transfer and Assignments

PPA withdraws.

Article 10, ASSOCIATION REPRESENTATIVES

10.1 Members of the bargaining unit selected to serve as authorized representatives of the Association shall be certified in writing to the Chief, Bureau of Police. Each representative will be expected to perform his or her duties as a representative of the Association on his or her own time. However, it is recognized that from time to time it will be necessary for Association activities to be carried on during working hours, for example, investigation and processing of complaints, disputes, and grievances, and attendance at Executive Board and general meetings (not to exceed 1,056 hours per year). The Maximum yearly allowance shall be one hundred ninety-two (192) hours, for any one Executive Board member, with no restriction on the number of hours per month which may be utilized by the member. It is further recognizes that there are reasonable limited deviations from this policy, such as posting of Association notices and distribution of union literature, which do not require Substantial periods of time. Where such activities are necessarily or Reasonably to be performed during working hours, they may be done without Loss of pay to the representative involved, provided the representative notifies His or her on-duty supervisor, whenever possible, prior to taking time from duty To engage in Association business that exceeds one hour. All Association activity will be reported on an appropriate time reporting form provided by Management.

10.1.1 Executive Board members not regularly assigned to day shift shall be Considered to be assigned to day shift for Executive Board meetings. However, no more than one member for the same Reporting Unit and shift (afternoon, nights) shall be assigned.)

10.2 Upon sufficient notification, the Chief of Police shall place officers or representatives of the Association on special duty for the purpose of attending as official delegates, union conventions or conferences to the extent that such special duty does not interfere with the reasonable needs of the Bureau of Police. However, the total time for all such leaves will not exceed three hundred and twenty (320) hours per contract year. The Association will reimburse the City for such time the members spend on Special Duty.

10.3 Recognizing that it is mutually advantageous to the City and the Association to maintain continuity of Association representatives, the City agreed not to transfer such representatives except in cases of promotion or necessity.

Article 22, GRIEVANCE AND ARBITRATION PROCEDURE

22.1 To promote better employer/employee relations, both parties pledge their cooperation to settle any grievances or complaints that might arise out of the application of this Contract by use of this procedure. One purpose of the grievance procedure shall be to attempt to settle grievances at the lowest level possible.

22.2 Step I. Any officer or the Association claiming a breach of any specific provision of this Contract may refer the matter in writing to the officer's immediate supervisor outside the bargaining unit. This grievance shall be presented within twenty (20) calendar days from the date of the alleged violation.

22.2.1 When the City has mathematically erred in computing or paying an officer's pay or other benefits, such pay or benefits shall be awarded the officer at the time the error is discovered by the City or otherwise brought to the City's attention.

22.2.2 The supervisor shall respond to the grievance within twenty (20) calendar days, and shall make such response to the grievant and the Association

22.3 Step II. If after twenty (20) calendar days from the date of the submission of the grievance to the supervisor, or from the date of the supervisor's reply, the grievance still remains unadjusted, the Association shall have twenty (20) calendar days to present the grievance in writing to the Chief of Police.

22.3.1 The Chief shall have twenty (20) calendar days in which to reply. If the Chief does not respond within the twenty (20) calendar days, or from the date of the Chief's response, if the grievance remains unadjusted, the Association shall have twenty (20) calendar days to may present the grievance to the Bureau of Human Resources.

22.4 Step III The Bureau of Human Resources shall have twenty (20) calendar days in which to reply. If the Bureau of Human Resources does not respond within twenty (20) calendar days, or from the date of the Bureau of Human Resources' response, the Association will have twenty (20) calendar days to notify the Bureau of Human Resources, in writing, of its intent to arbitrate.

22.5 To invoke arbitration, the City or the Association shall request from the Oregon Employment Relations Board, a list of the names of five (5) arbitrators. The arbitrator shall be selected by the method of alternate striking of names under which the first strike shall be determined by lot. The final name left on the list shall be the arbitrator. Nothing in this section shall prohibit the parties from agreeing upon a permanent arbitrator or permanent list. The arbitrator's decision shall be final and binding, but the arbitrator shall have no power to alter, modify, amend, add to or detract from the terms of the contract. The arbitrator's decisionshall be within the scope and terms of the Contract and in writing.

22.5.1 The arbitrator shall be asked to submit an award within thirty (30) days from the date of the hearing. The decision may also provide retroactivity not exceeding sixty (60) days prior to the date the grievance was first filed with the Chief and shall state the effective date.

22.5.2 Each party shall be responsible for paying the costs of presenting its own case in arbitration, including the payment of witness fees, if any. The costs by the arbitrator, court reporter (if any), and the hearing room shall be borne by the losing party. Following the rendering of the arbitrator's decision, the parties shall meet and attempt to agree which is the "losing party". If the parties areunable to so agree, the question of who the "losing party" is shall be submitted to the arbitrator who rendered the decision in question. The arbitrator's subsequent designation of the "losing party" shall be final and binding. If the arbitrator cannot designate which party is the loser, each party will pay one-half (l/2) the cost of the arbitration.

22.6 All grievances shall be in writing and clearly identified as a "Grievance." All grievances shall include the following information:

The date the grievance is filed;

The name of the grievant(s);

The article(s) of this Agreement alleged to have been violated, or the Discipline alleged to have been imposed without just cause;

The place, date and time the grievance occurred;

A short narrative explaining the facts and reasons supporting the grievance; and

The remedy being sought. Upon request of the City, any missing information shall be supplied in a timely manner.

22.7 All responses to grievances shall be in writing and clearly identified as a "Grievance Response." All responses to grievances shall be sent to the aggrieved officer(s) with copies to the Association. All responses to grievances shall include the following information:

The date of the response to the grievance;

The name of the person making the response;

The decision affirming or rejecting the grievance;

The proposed remedy if the grievance is affirmed; and

A short narrative explaining the facts and reasons supporting the affirmation or rejection of the grievance.

22.8 The members of the PPA Grievance Committee shall be allowed up to a maximum of two (2) hours on-duty time per meeting for meetings of the committee if the meeting is attended in part by a representative of the City authorized to adjust grievances on its behalf.

Article 39, EQUIPMENT ALLOWANCE

39.1 The City will also arrange for purchase of uniforms on a fit-to-size basis. Each uniformed officer shall receive $90.00 per year for the purchase of job-related equipment (example: gloves, and other incidentals, etc.).

39.2 The city shall furnish officers all required equipment, to include flashlights and handcuffs. The recommended standards for required equipment and clothing shall be set by the Safety Committee and the Uniform Committee. If the pertinent committee is unable to decide the matter However, the final decision will be left to the Chief of Police or the Chief's designee. (T.A.'d 06.07.02)

39.3 Payment shall occur no later than the second pay day in August of each year.

Article 40, MOTORCYCLE USE AND CARE

40.1 An officer assigned to active motorcycle duty will be permitted to garage the officer's assigned City motorcycle at home. Washing and maintenance service of the vehicle will be done during regular duty time.

(The PPA's proposal on authorized take-home vehicles to remain on table, and will be recaptioned by the PPA as a proposal for a new Article 40.2)

Article 42, EDUCATION REIMBURSEMENT PROGRAM

Current language.

Article 43.16

The PPA withdraws that portion of its proposal made on 02.01.2002 that provided as follows: "The employer shall provide employees who are placed in on-call status with a city vehicle to drive to and from their residences."

62.1 Except as provided in this article, the provisions of Article 61 of the parties' collective bargaining agreement shall apply to investigations conducted or reviewed by the IPR. However, given that IPR does not have authority or responsibility relating to the imposition of discipline, the following clarifications are made:

62.1.1 Relating to Article 61.2.3, if an investigation conducted or reviewed by IPR results in proposed discipline, all requests for information by the officer for IPR materials containing material facts of the matter must be made through the Personnel Division of the Portland Police Bureau.

62.1.2 Article 61.2.4 does not apply except that, consistent with Article 61.2.4.2, should the Bureau impose discipline based on an investigation conducted or reviewed by IPR, only the findings and disciplinary order issued by the Bureau may be placed in an officer's Personnel or "201" file.

62.1.3 The parties recognize that IPR has no authority or responsibility relating to Articles 61.6, 61.7, 61.8 and 61.9.

62.2 An officer who is dissatisfied with an investigation of alleged officer misconduct relating to a citizen-initiated complaint may request a review in accordance with IPR/CRC Protocols.

62.3 When an investigation is conducted by IPR, an officer shall have access to any summary report of an IPR investigation in which they (sic) were a suspect. The officer may submit rebuttal material as desired. When an investigation is reviewed by IPR, an officer shall have access to the IPR Final Report in accordance with the IPR/CRC Protocols. The Officer may submit rebuttal material as desired

62.4 Should a PPA member against whom a citizen complaint has been sustained and discipline imposed decide to utilize the IPR review process provided for under PCC Section 3.21, then Step 2 of the grievance process described in Article 22 of the collective bargaining agreement shall be held in abeyance until the IPR review process is complete. In no event will the grievance process be held in abeyance for more than six months from the date that the grievance was filed.

62.5 Article 15, Policies and Procedures and Other Orders, of the collective bargaining agreement will apply to rules proposed and issued by the IPR pursuant to PCC3.21.070(1).

Article 64, RECRUITMENT AND RETENTION INCENTIVES

64.3 LONGEVITY PAY. Effective January 1, the following longevity plan shall be implemented.

64.3.1 Upon the completion of their fifteenth year of service with the Bureau, officers shall receive longevity pay of 2.0%. Upon the completion of their twentieth year of service with the Bureau, officers shall receive longevity pay of an additional 2.0%, for total longevity pay of 4.0%. Upon the completion of their twenty-fifth year of service with the Bureau, officers shall receive longevity pay of an additional 2.0%, for total longevity pay of 6.0%

64.3.2 Longevity pay shall not be included in determining the officer's regular rate of pay for purposes of calculating overtime owed under the provisions of this Agreement including but not limited to the overtime provisions under Article 43.

64.3.3 Longevity pay shall be calculated on the basis of the officer's regular hourly rate, not including premium pay.

64.3.4 For the limited purposes of this section of the Agreement only, the City shall be allowed to establish the Section 207(k) exemption under the FLSA.

64.3.5 The association agrees to defend and indemnify the City from any and all claims that the City failed to include longevity pay in the regular rate of pay in violation of the FLSA.

64.3.6 For purposes of this section, time worked for another law enforcement agency by an officer who has transferred to City employment under ORS 236.605 to 236.640 (Transfer of Public Employees) shall be considered to be time worked with the Bureau.

64.3.7 For purposes of this section, time spent on LOS resulting from a nonservice-connected disability where the leave commenced after the date of execution of this agreement shall not be considered to be time worked with the Bureau.

Article 65, OVERPAYMENT

65.1 In the event that an employee receives wages or benefits from the City to which the employee is not entitled, regardless of whether the employee knew or should have known of the overpayment, the City shall notify the employee in writing of the overpayment which will include information supporting that an overpayment exists and the amount of wages and/or benefits to be repaid. For purposes of recovering overpayments by payroll deduction, the following shall apply:

65.2 The City may, at its discretion, use the payroll deduction process to correct any overpayment made within a maximum period of two (2) years before the notification.

65.3 Where this process is utilized, the City and the employee, and the Association if requested by the employee, shall meet and attempt to reach mutual agreement on a repayment schedule within thirty (30) calendar days following written notification.

65.4 If there is no mutual agreement at the end of the thirty (30) calendar day period, the City shall implement the repayment schedule stated in 65.5 below.

65.5 If the overpayment amount to be repaid is more than five percent (5%) of the employee's regular monthly base salary, the overpayment shall be recovered in monthly amounts not exceeding five percent (5%) of the employee's regular monthly base salary. If an overpayment is less than five percent (5%) of the employee's regular monthly base salary, the overpayment shall be recovered in a lump sum deduction from the employee's paycheck. If an employee leaves City serice before the City fully recovers the overpayment, the remaining amount may be deducted from the employee's final check.

65.6 An employee who disagrees with the City's determination that an overpayment has been made to the employee may grieve the determination through the grievance procedure. In the event a grievance is filed, recoupment deductions will be held in abeyance pending resolution of the grievance.

65.7 This Article does not waive the City's right to pursue its legal rights to recoup an overpayment where the employee is no longer in pay status, but does agree that it will attempt to use the procedures outlined in this article before pursuing those rights.

Appendix, Sergeant/Detective MOA

Incorporate revised MOA into contract.

GRIEVANCE SETTLEMENT

Portland Police Association Grievance No. 02-16

The parties to this Settlement are the City of Portland (City) and the Portland Police Association (Association).

1. The Association filed a grievance on September 13, 2002, on behalf of the estate of Officer Kirk Huffstetler alleging the violation of Article 26.5.2, Unused Sick Leave in the Event of Death, because of the City's failure to pay the estate the cash value of his unused sick leave

2. The reason the City did not pay the accrued sick leave is that the officer was covered by the Public Employee Retirement System (PERS which has its own law and administrative rules that relate to the use of sick leave accruals.

3. There is a good-faith dispute relating to Article 26.5.2 because it has been in the parties' agreements since 1979, at which point in time there were no sworn officers who were members of the PERS.

Agreement

The City and the Association agree to settle the grievance as follows:

1. The City will pay the surviving dependents of Officer Huffstetler a lump sum payment equal to one hundred percent of his unused sick leave.

2. Article 26.5.2 will apply to all officers in the Association's bargaining unit, for the period beginning the date that all parties have signed this settlement agreement to the date that the successor agreement takes effect.

3. The parties will reformat the successor Agreement to re-establish Article 26.5.2 as a separate section, and Article 26.6 will become a subsection of Article 26.5, and the ORS reference updated as follows:

26.5 Unused Sick Leave Upon Retirement

26.5.1 Fire and Police and Disability and Retirement Fund Members. An officer who has accumulated sick leave at the time of retirement shall receive credit in an amount equal to thirty percent (30%) of the first four hundred and eighty (480) hours of such accumulated sick leave, fifty percent (50%) of the second four hundred and eighty (480) hours, and seventy percent (70%) of all accumulated sick leave in excess of nine hundred and sixty (960) hours up to a maximum of 2,064 hours. The cash value of such credit will be calculated on the basis of the officer's pay rate at the time of retirement. Upon retirement, an officer shall receive a lump sum cash payment for the sick leave credit.

26.5.2 Public Employee Retirement System. Individuals covered by the Public Employee Retirement System (PERS) shall be permitted to convert unused sick leave upon retirement in accordance with ORS 238.350 and PERS administrative rules.

26.6 Unused Sick Leave in the Event of Death. The City will pay a lump sum cash payment equal to one hundred percent (100%) of unused sick leave to the surviving dependents of any officer who dies prior to retirement. If the ordinance, statute, or rules for calculating the death benefit of a member of either the Fund or the PERS are amended to include the value of unused sick leave; this section will be amended to assure that double recovery does not occur.

4. The Association will withdraw the grievance.

On March 15, 2004, the parties stipulated as follows regarding the City's wage proposal for fiscal year2003-04:

1. At no time period did the City indicate that it was rolling back wages.

2. At all times, the City characterized its proposal as a CPI wage increase for each year of the contract;

3. At no time during bargaining through mediation, through the final offer, did the PPA understand the City's proposal constituted a wage rollback;

4. At no time before the start of the hearing, did the PPA ever indicate to the City that it believed the City's proposal constituted a wage rollback.

5. At no time before the start of the hearing, did the PPA ever bring any mistake in the City's wage offer for fiscal year 2003-2004 to the City's attention.

6. The City will withdraw from evidence Exhibits I-111, 112 and 114.

7. The City will redact from Exhibit I-110 reference to discussions regarding a tentative agreement that the parties have had.

8. The City agrees that it will not challenge the arbitrator's decision to exclude Exhibits I-111, I-112 and I-114.

On March 15, 2004, the parties also agreed as follows:

1. The language of the tentative agreements should be automatically included in whichever Last Best Offer package is awarded.

2. A tentative agreement exists regarding Article 26.6 - "Unused Sick Leave in the Event of Death." The language will read as it appears in the City's Last Best Offer (page 13).

3. A tentative agreement exists regarding Articles 58.2.2 and 58.2.4 - "Vests." The language will read as it appears in the City's Last Best Offer (page 33).

4. A tentative agreement exists regarding Article 55.2 - "Alternative Shift Schedules." That article is deleted, as it appears in the City's Last Best Offer (page 29).

5. A tentative agreement exists regarding Article 65.1.1 - "Recruitment and Retention Incentive." The language will read as it appears in the City's Last Best Offer (page 37).

6. A tentative agreement exists regarding Article 65.2, as to the VEBA. The language will read as it appears in the City's Last Best Offer (page 38).

III. TWO STATUTORY CRITERIA HIGHLIGHTED.

A. Selecting Comparable Communities in the Public Interest

Because the parties disagree about the meaning and application of Oregon law, it is necessary to add to the burgeoning literature in Oregon on the meaning of the "public interest" mandate. ORS 243.746(4) states:

Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. Arbitrators shall base their findings and opinions on these criteria giving first priority to Paragraph (a) of this subsection and secondary priority to paragraphs (b) to (h) of this subsection as follows:

(a) The interest and welfare of the public. (Emphasis added.)

There follows in the law after the "public interest" mandate a list of standard criteria customarily used by interest arbitrators to evaluate contract proposals, such as, ability to pay, an assessment of overall compensation, and a comparison of overall compensation with the same or other employees in comparable communities. The "interest and welfare of the public" is labeled in the law as a "first priority," and the list of traditional criteria is labeled as a "secondary priority."

While it is clear that the Last Best Offer selected by an arbitrator must be based on "the interest and welfare of the public," the legislature offered no explanatory statements about implementing this guideline. The legislation does not define what it means to "base" findings and opinions on any of the criteria, nor, for that matter, what it means to give "first priority" or "secondary priority" to a particular criterion. Did the legislature intend the "public interest" standard to control all others? Should needs and interests of a party be ignored in order to serve the public interest?

It is reasonable to conclude that the absence of an express statement of legislative intent, when Oregon lawmakers well understand how specifically to describe the way a policy should be applied, suggests that interest arbitrators are authorized to use reasonable flexibility in fulfilling their "public interest" mandate.. The "public interest" standard allows an arbitrator to use a balancing process that weighs elements related to the impact of a proposal on the parties. Those related elements are codified in the secondary criteria set forth in paragraphs (b) to (h) of the legislation. Economic issues and departures from prior policies merit heightened scrutiny and an application by an arbitrator of what courts sometimes refer to as the "hard look" doctrine. (See Office of Comm. of the U.C. of C., 707 F.2d. 1413, 1425 (D.C. Cir. 1983).)

Use of the "public interest" standard as the first priority requires an arbitrator to balance all relevant factors the legislation instructs an interest arbitrator to consider. Using a balancing process to evaluate relevant statutory criteria, an interest arbitrator must determine whether one Last Best Offer package has been guided by more reasonable considerations than the other. In balancing all the relevant statutory criteria, an interest arbitrator must attempt to resolve questions of fact, evaluate the effectiveness of proposals, test the reasoning of the parties, and study comparability data. These implicit factors help give substance to an otherwise elusive "public interest" determination. Otherwise, the decision-making process is unduly subjective, and it is more sensible to conclude the legislature designed a process that is reasonably objective. The law supports a conclusion that the legislature intended the statutory standard it labeled "public interest" to leave reasonable discretion with an interest arbitrator to apply secondary criteria flexibly. Had the legislature intended otherwise, it clearly understood how to express a more inflexible guideline and to define with specificity its view of "the interest and welfare of the public."

A key test in the "public interest" balancing process is that any factor used by an interest arbitrator to evaluate Last Best Offers must advance one of the purposes the Oregon Legislature had in mind when it enacted SB 750. A pivotal purpose of collective bargaining legislation is to maintain the high morale of public safety employees as well as the efficient operation of governmental services. Moreover, the legislature stated that requirements of interest arbitration procedures are to be liberally construed.

Use of comparability data as a valuable source of guidance advances the public interest because the Oregon Legislature contemplated encouraging the goal of peaceful labor-management relations, and comparability data help define equitable solutions, thereby advancing this legislative goal. Thus, it is consistent with the "public interest" mandate to make use of such information to the extent it is drawn from comparable jurisdictions. Moreover, a reasonable relationship exists between a close scrutiny of comparability data or similar information and aims of the Oregon design of interest arbitration. The Oregon design is intended to discourage an arbitrator from relying too much on his or her own discretion. A heavy reliance on comparability data and such traditional information is consistent with this legislative intent. Use of such traditional information helps bring balance to the bargaining relationship between the parties and helps bring or restore relationships to a normal condition. These are legislative goals of the Oregon public sector collective bargaining law.

While comparability data and similar information do not provide a definitive guideline in selecting the most reasonable package of offers, they do offer a principled way of making equitable comparisons. Accurate comparisons long have been viewed by interest arbitrators as one method of testing the fair treatment of employees. Such treatment is a goal the legislation is designed to advance.

Comparability data and similar information cannot provide a definitive guideline in an interest arbitration dispute because of the exasperating problem of making precise comparisons. No two police departments are exactly the same. Inherent differences in communities make it impossible to establish mathematically precise comparisons. Communities differ in their ability to or interest in supporting various governmental entities.

The parties in this case disagree vigorously about who is comparable to Portland, Oregon. Oregon law requires that those entities selected for comparison must have employees performing similar services in comparable communities, and Portland's population adds the additional statutory element of out-of-state cities of the same or similar size having employees performing similar services in comparable communities. The law is clear that, first, employees to be compared must perform similar services. "Similar" is not defined in the law. Second, they must perform their services in comparable communities. Within Oregon, data must be drawn from comparable communities of the same or nearest population range. Outside of Oregon, data must be drawn from comparable cities of the same or similar size. It is important to emphasize that, in both instances, employees who are the focus of comparison must be performing similar services in comparable communities.

The thrust of the language in ORS 243.746(4)(e) is on gathering comparability data. ORS 243.742 makes explicit that this provision on comparability is to be liberally, not narrowly, construed. Likewise, a standard principle of statutory interpretation is that a proviso qualifies the provision immediately preceding it, but it does not supplant the provision. In other words, ORS 243.746(4)(e)(A) adds a qualification but does not eliminate requirements in the immediately preceding provision. The proviso adds a qualification that comparison of any city with a population of more than 325,000 must be with out-of-state cities having the same or similar size. "Similar size" is not defined in the legislation.

The proviso covering cities of similar size does not eliminate the legislative requirement that employees must be performing similar services in comparable communities. No evidence suggests that the legislature made use of the "expressio unis est exclusio alterius" rule (the expression of one thing excludes another). In fact, the structure of the statutory provision argues for the reverse conclusion. If the legislature had made use of the "expression of one thing excludes another" principle, it would have been more reasonable to have stated that "comparable" means comparison to out-of-state cities of the same or similar size. The legislature , instead, stated that " 'comparable' includes comparison to out-of-state cities of the same or similar size." Although the "population" factor is included, the "population" proviso in ORS 243.746(4)(e)(A) does not exclude a requirement that data be collected from comparable communities. The "population" proviso does not eliminate the earlier reference to "comparable communities" in the first sentence of Section (e) and substitute population as the only test of comparability.

The legislature mandated that interest arbitrators "shall base their findings and opinions" on comparing "the overall compensation of other employees performing similar services with the same or other employees in comparable communities." Lawmakers, then, added a qualification that, "for any city with a population of more than 325,000 'comparable' includes comparison to out-of-state cities of the same or similar size." Comparisons, accordingly, must be made with employees who do similar work in comparable communities, and a city in Oregon of more than 325,000 citizens wanting to compare its employees with workers performing similar services must do so with out-of-state cities of the same or similar size that, additionally, are communities generally comparable to Portland, Oregon as defined by standard elements of comparability.

If comparability data are to be used by parties in interest arbitration, the most prudent course is for them to make the topic one of negotiation and to bargain into existence a list of comparable communities. The list, then, ought to remain in use until they bargain into existence a new list. In this case, "there was no bargaining or discussion by either side about either side's comparables." (See Tr. Jan. 21, 2004, p. 44.) Without a mutually accepted list of comparable communities, it becomes an interest arbitrator's duty to rationalize the process.

Oregon law is of little use in this regard. While mandating the use of comparability data, the legislature failed to pour content into the meaning of "comparable" communities, or, for that matter, the meaning of "similar work" or "similar size." What are the indicia of a comparable community? William Hazlitt, the nineteenth century essayist, observed in Table Talk that "comparisons are odious, because they are impertinent--making one thing the standard of another which has no relationship to it." Even though some find it disagreeable, inherent in the legislative mandate is an obligation to make good faith comparisons. A good faith comparison, of course, presumes an effort has been made to compare with a community having general characteristics basically like those of the home community. For example, is it sensible to compare a police department operating under a comprehensive collective bargaining law with a police department having no statutory authority to engage in public sector collective bargaining? The two entities on the face of it are not comparable.

One benefit of comparisons is the sense of relativity it gives. This advantage is essentially lost if the two points of comparison are remote in circumstances, geography, and culture. For example, a comparison of Portland, Oregon with Leister, England, a city of similar population size , is quite possible to perform, but it would do little to inform an interest arbitrator's decision in Oregon. Good faith comparisons must be considered in relation to time, place, and circumstances.

It is no surprise that, in an adversarial confrontation, comparability in interest arbitration is a subject about which few people would agree. Agreement, if it is to be achieved, needs to be reached at the bargaining table prior to interest arbitration. Elements of comparability to be weighed involve a lot of subjective judgments, and the parties are best served by sorting out the comparative elements in face-to-face negotiation. An arbitrator, however, is constrained by law to evaluate evidence and not to rely on subjective beliefs, and it, then, is necessary for an arbitrator to search for points of comparison. A hidden problem of an arbitrator using unnegotiated comparability data is that charts constructed by an arbitrator may appear to provide clarity and may even seem to appeal to equity while, at the same time, disguising imprecision and also ignoring the complexity of problems associated with "comparability" determinations. Comparisons may impart a false sense of certitude.

For example, one seemingly similar community may offer comparative advantages in taxing structures, the cost of living, the strength of the local economy, transportation conveniences, or rent subsidies. Communities are differently endowed by nature with climate and resources, and these comparative advantages may not be encapsulated in wage charts or population tables relied on by an arbitrator. The complexity of comparisons is increased when parties change their pool of comparative entities or use significantly different methods of calculating averages or key rates. Administering comparisons is most vexing when parties use diverse calculating techniques. Despite the fact, however, that unnegotiated comparisons may not adequately demonstrate the wealth, income levels, job content, or tax base of comparable communities, such comparisons are standard in interest arbitration, are mandated by Oregon law, and provide a sufficient amount of insight to justify their use. At the same time, they are only one source of guidance and do not provide a definitive answer as to which package of offers best addresses the interests and welfare of the public.

These are the Association's chosen comparable communities because an interest arbitrator selected them in a somewhat similar dispute between the parties twenty years ago. In 1984, the interest arbitrator explained why he used selected cities as points of reference. He stated:

Utilizing cluster analysis, groups of cities showing common characteristics (variables) with the City were grouped by computer into a final 'stable' cluster of Washington and California cities: Seattle, Sacramento, Oakland, Long Beach, San Francisco and San Jose. The method used by the Association was totally objective and as "scientific' as possible. As noted by the Association in its post-hearing brief, the method selected may not be the only method, but it is a non-predetermined, objective method that 'worked.' (See Association's Exhibit No. 7-119, p. 30, emphasis added.)

In 1984, the Association used factor and regression analysis to select comparable communities for comparison; and the arbitrator concluded that the Association's selection methods "were as fair and objective as possible." (See p. 31.) Rejecting the City's methodology "grounded in principles of supply and demand," the arbitrator in 1984 relied on the Association's list of comparable communities. Coming forward to this century, the Association added to the 1984 list the community of San Diego, California. On September 12, 2003, however, the Association, in response to an earlier objection from the Employer, discontinued using San Diego as a current comparable jurisdiction. (See Tr., September 12, 2003, p. 208.) It was consistent with Oregon law for the Association to do so. Oregon law is designed to encourage parties to seek common ground and to be reasonable. Better that the effort should come in the Last Best Offer than not at all.

Using 2000 census data, the City selected the five cities above and below the population of Portland (with the exception of New Orleans) as jurisdictions deemed to be comparable to Portland. A prior arbitrator suggested that the parties not use New Orleans, and the City followed his advice. Asserting that the Association used a "cherry picked list" of comparable communities, the City maintained that the definitive legal characteristic of comparability is population; but Oregon law mandates a much broader basis of comparison. (See City's Post-hearing Brief, p. 103.) The City recognized that use of additional elements of comparison might be informative but rejected that approach. The City's chief negotiator testified as follows in response to the attorney's question:

Question: Would you agree with me that cities that have similar populations can be significantly different from each other in terms of how comparable they are in an economic and a social and, generally, a demographic sense?

Answer: That's very possible. (See Tr., January 21, 2004, p. 47.)

Comparisons made pursuant to the statute will never be mathematically exact, but a reasonable interpretation of the legislative mandate is that the City of Portland, Oregon must be compared with comparable communities; and any comparable community outside of Oregon must be a city of similar size having employees who perform similar services. Among the City's chosen comparable jurisdictions are three (Charlotte-Mecklenburg; Denver; and Las Vegas) where police personnel perform both city and county services. Law enforcement personnel in cities as contrasted with counties often use different skills, provide different services, and may have a significantly different wage structure. (See Association's Exhibit No. 7-141.)

A number of the comparable jurisdictions selected by the City have no state public sector collective bargaining law. Even in communities, such as Denver, Colorado, that authorize bargaining by local ordinance, the context and influence of collective bargaining provide a significantly different environment for labor negotiations. All the major cities surrounding Portland, whether in Oregon or not, engage in state-mandated bargaining, and this has an impact on wages and working conditions in the local labor market for comparative purposes. As a general rule, proximity is also more persuasive in interest arbitration than remoteness. Parties tend to have more familiarity with communities that are geographically nearer, and there may be secondary conditions in farther distanced communities that are not generally known in the home city. Since the early days of interest arbitration in the United States, a preference has existed for data drawn from geographically closer communities over those in a distant area. (See, e.g., Twin City Rapid Transit Company, 7 L.A. 848 (1947); Reading Street Railway Company, 6 LA 860 (1947); Green Bus Line, 8 LA 468 (1947); Jamaica Buses, 4 LA 225 (1946); and Committee for Tanker Cos., 12 LA 855 (1949).) For example, Charlotte, North Carolina, is not only in a state without public sector collective bargaining but also is almost 3,000 miles from Portland.

The parties used only two of the same comparable communities on their respective lists, namely, Long Beach, California and Seattle, Washington. Otherwise, the City used only two comparable jurisdictions that both provide statewide public sector collective bargaining and also use their personnel only for city law enforcement duties. They are Cleveland, Ohio and Oklahoma City, Oklahoma. Adding Cleveland and Oklahoma City to the list of comparable jurisdictions used by the Association may provide guidance in this dispute from time to time. In terms of population, both Oklahoma City and Cleveland are slightly smaller than Portland. Because of changes in Oregon law, San Francisco and San Jose must be dropped from the Association's list.

B. Using More Than a "Population" Test

Despite assertions to the contrary, what happened between the parties in 1984 is relevant today. (See City's Post-hearing Brief, p. 101.) An interest arbitrator used what he believed to be comparable communities in 1984 to guide him in making decisions. It is correct that some aspects of the Oregon public sector collective bargaining law changed in 1995, but the Association used a scientifically defensible method to select comparable communities in 1984. The interest arbitrator at the time incorporated a use of those communities into the relationship between the parties. It, then, was incumbent on the City to offer a principled basis for rejecting those 1984 comparable jurisdictions if they are unsuitable for use in the 2004 interest arbitration. The Employer used a "population only" definition of "comparable communities" as a defense for rejecting the 1984 comparable communities used by the prior interest arbitrator, but such a defense was insufficient due to the fact that the definition in Oregon law is broader than merely using population as a solitary touchstone.

At the same time, it is important to be guided by the 1995 legislative changes which made population a significant factor in selecting comparable communities for comparative purposes in interest arbitration. As stated earlier, however, the legislature did not eliminate a requirement that the primary focus of comparison be on employees performing similar services in comparable communities. The legislature, rather, added a requirement that such data must come from any out-of-state cities of similar size.

The "population" factor in ORS 243.746(e)(A), therefore, offered the City a valid defense to the Association's use of San Jose (894,943 population) and San Francisco (776,733 population) as legitimate cities of comparison. Neither has a population of Portland's size, and the Association did not prove that either has a "similar size" to Portland in some sense other than population. Accordingly, the relevant out-of-state comparable cities in this proceeding are:

Jurisdiction Population

Cleveland 478,403

Long Beach 461,522

Oakland 399,484

Oklahoma City 506,132

Sacramento 407,018

Seattle 563,374

Portland 529,121

Using data from the 2000 census, the average population of these cities is 469,322. This average population is of a similar size to Portland. All also have a state-wide public sector collective bargaining law. No persuasive evidence established that cultural, economic, or natural factors cause these cities not to be comparable communities to Portland, and nothing in the record suggests that relevant employees in these jurisdictions are dissimilar in the services they provide.

The six cities are similar to Portland not only in terms of population but also in a variety of other ways. A highly detailed cluster analysis has not been conducted due to insufficient surveys, but sufficient evidence is in the record to confirm the relative comparability of these cities to Portland. By its nature, a comparison lacks mathematical exactitude; and it is probably impossible to find a group of cities exactly like Portland. But the "snapshot" data are sufficient to bolster confidence in using these cities as a source of guidance to help evaluate the nature of the two Last Best Offers. As indicated, negotiated comparable cities remain preferable; but the parties, by virtue of their conflicting approaches, left it to the arbitrator to resolve the problem in this case.

A review of data on property crimes in the six comparable cities shows that they are reasonably similar to Portland. On average for the period surveyed, the six cities had 2,872 property crimes per 100 officers; and Portland had 3,500. A review of data on violent crimes shows a similar result. The six comparable cities had 437 violent crimes per 100 officers, while Portland had 566 per 100 officers. Likewise, during the period surveyed, the comparable cities on average spent $292 of the police budget per resident; while Portland spent $208. Mr. Schaff testified that data on the per capita assessed valuation of Cleveland and Oklahoma City were not available, but the average per capita assessed valuation for the West Coast comparable cities is $79.27; and it is $68.25 for Portland. Portland has a land area in square miles of 134 miles, and the average of the six comparable communities is 162 square miles. The average median family income of the six comparable cities for the period studies was $43,601, and it was $50,271 in Portland. The comparable communities had 26.8% of their residents with a bachelor's degree, and it was 32.6% in Portland. While data drawn from the points of comparison with Portland are not definitive, they are, in the aggregate, sufficiently similar to provide reliable guidance with regard to the comparative nature of the two Last Best Offers.

IV. THE ISSUE OF HEALTH BENEFITS

A. The Language of the Last Best Offer

1. The City's Offer

ARTICLE 48

HEALTH AND WELFARE

48.1 Labor/Management Benefits Committee

48.1.1 The parties agree to the continuation of the City-wide Labor/Management Benefits Committee. The committee will consist of 14 members. One member shall be appointed from each of the following labor organizations: the District Council of Trade Unions (DCTU), the Portland Police Association (PPA), the Portland Fire Fighters' Association (PFFA), the City of Portland Professional Employees Association (COPPEA), AFSCME, Local 189 representing Emergency Communications Operators (BOEC), Municipal Employees, Local 483 representing Recreation Instructors (Recreation) and the Portland Police Commanding Officers Association (PPCOA). The remaining seven members shall be appointed by the City.

48.1.2 A quorum of twelve voting members is required for the committee to take action. An absent committee member may designate a substitute with full voting authority. Any committee member may invite one or more visitors to attend committee meetings.

48.1.3 The committee shall select its chairperson, who shall serve at the will of the committee.

48.1.4 In order to make a recommendation to the City Council, at least 12 committee members must vote in favor of the recommendation. The committee shall be responsible for establishing internal committee voting and decision-making processes.

48.1.5 Members of the committee shall be allowed to attend committee meetings on on-duty time. In the event meetings are scheduled outside the regular shift hours of a committee member, the City shall make every effort to adjust the shift of the member to allow the member to attend while on duty.

48.1.6 The committee shall meet at least quarterly, and shall make written recommendations regarding plan design changes in the employee benefits program to the City Council no later that April 1st of each year.

48.1.7 The City Council shall retain the discretion to implement or reject any of the committee's recommendations. In the event the committee makes a recommendation that is consistent with the committee's authority, is actuarially sound and meets all the requirements of federal, state and local laws, and Council rejects the recommendation, any reductions in plan costs that may have occurred due to the change in plan design, will be treated as having occurred for the purposes of calculating the maximum City contribution under this Agreement. These costs will be calculated by evaluating the premiums and/or rates as if the changes had occurred, the rates and/or premiums absent the changes, and the member of participants under the plan(s) involved. (For example, if the self-insured plan two party rate would be $298 per employee per month with the addition of a benefit design change "X", but Council rejects the design change and therefore the two party rate is $350 per month per employee, the City contribution will be increased $52 per month per employee on the self-insured plan to give credit for the change.)

48.2 Benefits Eligibility

48.2.1 Permanent full-time officers shall be eligible for medical, dental, vision and life insurance coverage the first of the month following thirty (30) days of eligible service. Medical, dental, vision and life insurance benefits will be paid at 100% of the City contribution for those officers who have a Standard Hours designation of at least seventy-two hours in a pay period in a benefits eligible, budgeted position.

48.2.2 Permanent part-time officers will be eligible for medical, dental, vision and life insurance coverage the first of the month following 174 hours of eligible service. Medical, dental, vision and life insurance benefits will be paid at 50% of the City contribution for any permanent officer who has a Standard Hours designation of at least forty hours but less than seventy-two hours in a pay period in a benefits eligible, budgeted position.

48.2.3 Medical, dental, vision and life insurance benefits may be denied to officers who are in a pay status for less than eighty (80) hours during a calendar month by the withholding of City-paid premiums for the subsequent month.

48.3 Plan Options

48.3.1 As soon as practicable after the effective date of this agreement, employees will enroll in the following healthcare plan options: CityCore/VSP, Kaiser NW HMO/Kaiser Vision, ODS Dental, Kaiser NW Dental, or may opt out as provided for in Article 48.8.

48.3.2 The parties agree that the CityCore plan meets the stated goal of a new self-insured core plan that reduces the July 1, 2001 self-insured plan cost projections by at least 25%. The parties also agree the revised Kaiser (Medical and Dental) and ODS Dental plans meet the stated goal of implementing new insured plans that reduce the July 1, 2001 cost projections by at least 9.1%.

48.4 City Contribution

48.4.1 Effective upon enrollment in the plans described in 48.3.1 above, for Plan Year 03/04 the City contribution shall be:*

Medical One Party $260.71 per month

Two Party $513.89 per month

Family $692.20 per month

Dental One Party $52.83 per month

Two Party $90.93 per month

Family $154.03 per month

Vision One Party $5.75 per month

Two Party $10.37 per month

Family $13.96 per month

Total One Party $319.29 per month

Two Party $615.19 per month

Family $860.19 per month

*These medical cap amounts reflect a cap adjustment of 10.5% for plan year 02-03 and a cap adjustment of 5.1% for plan year 03-04.

48.4.2 Effective July 1, 2004, the City contribution rates in 48.4.1 shall be adjusted to reflect the full annual percentage increase in the Portland Medical Care CPI-W as measured by the index for January 2004 and 2nd Half 2003. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than ten percent (10.0%).

48.3 City Contributions

48.3.1 For the plan year commencing July 1, 1999, the City shall make contributions to the Health Fund for each self-insured medical plan participant in the amounts set forth below:

Medical One Party $210.38 per month

Two Party $414.68 per month

Family $558.57 per month

Dental One Party $42.63 per month

Two Party $73.38 per month

Family $124.29 per month

Vision One Party $4.64 per month

Two Party $8.37 per month

Family $11.26 per month

Total One Party $257.65 per month

Two Party $496.44 per month

Family $694.11 per month

48.4.3 The Ccity's total contribution for insured plan participants shall be limited to the actual insured plan premium rate, not to exceed the amounts set forth above. Should the insured plan premiums exceed the cost of the Ccity's self-insured core plans, the parties agree that the Benefits Manager and the Labor/Management Committee will use their its best efforts to control the cost of the insured plans, including consideration of replacement of the current insured plans with other insured plans, or with new self-insured plans.

48.3.1 Effective July 1, 2000, the City contribution rate shall be adjusted to reflect the full annual percentage increase in the Portland CPI-W as measured by the index for January 2000 and 2 nd Half 1999. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than four and one half percent (4.5%). For the plan year commencing July 1, 2000, the City shall make contributions to the Health Fund for each self-insured medical plan participant in the amounts set forth below:

Medical One Party $218.16 per month

Two Party $430.02 per month

Family $579.24 per month

Dental One Party $44.21 per month

Two Party $76.10 per month

Family $128.89 per month

Vision One Party $4.81 per month

Two Party $8.68 per month

Family $11.68 per month

Total One Party $267.18 per month

Two Party $514.81 per month

Family $719.79 per month

48.3.2 Effective July 1, 2001, the City contribution rate shall be adjusted to reflect the full annual percentage increase in the Portland CPI W as measured by the index for January 2001 and 2 nd Half 2000. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than four and one half percent (4.5%).

48.4.4 If the Ccity's contribution plus the employee contribution in Article 48.5 is less than the self-insured or insured plan costs, the difference shall be paid by employees through a monthly pre-tax payroll deduction each payday (except for the third payday in a month). In the alternative, if the Ccity's contribution plus the employee contribution in Article 48.5 is less than the self-insured core plan or insured plan costs the Ccommittee may recommend to require elect to have the difference be paid from any available excess reserves in the Health Fund. For purposes of these calculations, "plan costs" for the self-insured and insured plans shall be defined to include domestic partners insurance, and insured and self-insured medical, dental, vision and prescription drug benefit plans.

48.6 The amount the City shall contribute to the Health Fund for each self-insured medical plan participant shall be established annually and will be documented in the form of a Memorandum of Agreement.

48.7 Employee Contributions

48.7.1 Effective July 1, 2003, each payday (except for the third payday in a month) each employee on the self-insured plan shall pay the following amount through a pre-tax payroll deduction:

One Party $5.50 per payday

Two Party $10.00 per payday

Family $15.00 per payday

48.7.1.1 Because the CityCore premiums for Plan Year 03/04 are for the most part below the City Contribution provided for in Article 48.4.2, the parties agree to waive the collection of the employee contributions in Article 48.7.1 for Plan Year 03/04.

48.7.2 Effective July 1, 2004, each payday (except for the third payday in a month) each employee on the self-insured plan shall pay the following amount through a pre-tax payroll deduction:

One Party $5.50 per payday

Two Party $11.00 per payday

Family $16.50 per payday

48.8 Opt Out

48.8.1 Upon the date the healthcare plan options described in 48.3.1 above become effective for this bargaining unit, a benefits eligible employee who has alternate group medical coverage may choose to opt out of City provided medical coverage. A full-time employee who chooses to opt out shall not be required to pay the employee premium contribution in 48.5 and shall receive a cash payment every payday (except for the third payday in a month) as follows:

Cash Payment One Party $25.00 per payday

Two Party $45.00 per payday

Family $62.50 per payday

48.8.2 Employees may elect to receive the cash payment in 48.8.1 as cash (subject to withholding) or as a pre-tax contribution into a Flexible Spending Account (MERP or DCAP). In addition to the cash payment to the employee, the City shall contribute for each full-time employee who opts out of medical coverage an additional amount to the Health Fund as follows:

City Contribution One Party $99.03 per payday

Two Party $79.03 per payday

Family $61.53 per payday

48.8.3 Upon the date the healthcare options described in 48.3.1 above become effective for this bargaining unit, for Plan Year 03/04 the contribution in 48.8.2 shall be adjusted by 5.1% as follows to reflect the full annual percentage increase in the Portland Medical Care CPI-W as measured by the index for January 2003 and 2nd Half 2002:

City Contribution One Party $104.08 per payday

Two Party $83.06 per payday

Family $64.67 per payday

48.8.4 Effective July 1, 2004, the City contribution in 48.8.3 shall be adjusted to reflect the full annual percentage increase in the Portland Medical Care CPI-W as measured by the index for January 2004 and 2nd Half 2003. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than ten percent (10.0%).

48.9 Health Fund Reserves

48.9.1 The Health Fund shall be maintained with adequate reserves to meet fund obligations, which include claims, Incurred But Not Reported Claims Reserves, and Large Claim Reserves. The committee shall make recommendations to the City Council on creating other reserves as appropriate.

48.9.2 The term "excess reserves", as used in this Agreement, shall be defined as the monies in the Health Fund which are not needed to meet fund obligations. Excess reserves shall remain in the Health Fund, but shall be subject to separate reporting to the committee.

48.9.3 The Health Fund and all reserves associated with the Fund must be maintained in an interest bearing account. Fund reserves shall be pooled, and shall not be allocated on an individual employee or employee group basis.

48.10 Retiree and Survivor Benefits

48.10.1 The City shall make available to a retired officer, spouse and children, or to the surviving spouse and children, or to the surviving spouse, the same medical, dental, and vision benefits offered to active officers. The cost of the plans shall be borne by the retiree or his/her spouse.

48.10.2 In order to be eligible to receive the retiree health coverage provided for herein, the retiree must have had coverage under one of the City's active employee health plans in the month preceding his/her retirement. Retiree health coverage must be requested within 60 days of retirement unless the retiree/spouse has had other employer-sponsored group coverage continuously between the retiree's effective date of retirement and the date when the coverage described above is to commence.

48.10.3 Coverage shall continue to be available to a retired officer until the retiree becomes eligible for federal Medicare coverage. Coverage shall continue to be available to a retiree's surviving spouse until the spouse is eligible for federal Medicare coverage. Dependent coverage for the retiree's unmarried children shall continue to be available until the retiree's child reaches the age of majority under the applicable health plan. In the event that any coverage provided to a retiree or a retiree's surviving spouse is terminated by the retiree/surviving spouse prior to the time the retiree/surviving spouse becomes eligible for federal Medicare coverage, the future availability of such coverage will be contingent upon the retiree or retiree's surviving spouse maintaining continuous coverage through some other employer-sponsored group health plan between the date of termination and the date the retiree or retiree's surviving spouse wishes to re-enroll in a City health plan.

48.10.4 A retiree or a retiree's surviving spouse who elects to participate in an insured health plan maintained by the City (e.g., Kaiser) will pay rates charged by the insurer for participants in their age group. If the insurer charges a higher rate for participants who are over 65, the City will allow the participant to switch to its self-insured plan. A retiree or a retiree's spouse who elects participation in a self-insured health plan offered by the City will pay the rate charged for active employees.

48.10.5 The City shall provide to the spouse and eligible dependent children of an officer who is killed on the job, the same medical, dental and vision benefit plans available to active officers. The City agrees to continue the City contribution for the spouse and eligible dependent children until the spouse becomes eligible for federal Medicare coverage reaches age sixty-five or remarries and for each eligible dependent child to the age which meets the eligibility requirements of the health plan in which they are enrolled.

48.10.6 The promise of the City to provide insured plans is dependent upon the continuing availability of such plans from an insurance carrier and the qualification by the retired officer with the plan while the retiree was employed with the City. Should an insurance carrier terminate the plan, the City shall attempt to replace it.

48.11 Life Insurance

48.11.1 The City shall provide each officer with a life insurance policy; said policy shall be secured and maintained in accordance with the City's existing practices.

48.11.2 The value of the policy shall be no less than $50,000 and if greater, shall be such amount as established by the City Council upon the recommendation of the Labor/Management Benefits Committee.

48.11.3 The City shall make available supplemental life coverage on a voluntary, employee paid basis.

48.12 Deferred Compensation. The City shall allow officers under this contract to participate in the Deferred Compensation Program that is currently available to officers. However, if the program is determined not to be allowable as a tax deferral under the Internal Revenue Code, the participating officer shall hold the City and the unions harmless against any and all claims, demands, or other forms of liability arising as a result of any invalidation of the terms and conditions of the Program.

48.13 Federal Health Legislation. If the Federal Government enacts federal health legislation, or if any taxing authority taxes or otherwise limits or restricts health care benefits paid by the City, the City and the Association will immediately negotiate on the effect of that legislation as it pertains to this Article.

48.14 Disability Insurance. The City shall modify the benefits plans to include the addition of disability insurance for officers if recommended by the Labor/Management Benefits Committee and approved by the Portland City Council.

2.The Association's Offer

ARTICLE 48

HEALTH AND WELFARE

48.1 Labor/Management Benefits Committee

48.1.1 The parties agree to the continuation of the PPA's participation in the City-wide Labor/Management Benefits Committee until June 30, 2004. The committee will consist of 14 members. One member shall be appointed from each of the following labor organizations: the District Council of Trade Unions (DCTU), the Portland Police Association (PPA), the Portland Fire Fighters' Association (PFFA), the City of Portland Professional Employees Association (COPPEA), AFSCME, Local 189 representing Emergency Communications Operators (BOEC), Municipal Employees, Local 483 representing Recreation Instructors (Recreation) and the Portland Police Commanding Officers Association (PPCOA). The remaining seven members shall be appointed by the City.

48.1.2 A quorum of twelve voting members is required for the committee to take action. An absent committee member may designate a substitute with full voting authority. Any committee member may invite one or more visitors to attend committee meetings.

48.1.3 The committee shall select its chairperson, who shall serve at the will of the committee.

48.1.4 In order to make a recommendation to the City Council, at least 12 committee members must vote in favor of the recommendation. The committee shall be responsible for establishing internal committee voting and decision-making processes.

48.1.5 Members of the committee shall be allowed to attend committee meetings on on-duty time. In the event meetings are scheduled outside the regular shift hours of a committee member, the City shall make every effort to adjust the shift of the member to allow the member to attend while on duty.

48.1.6 The committee shall meet at least quarterly, and shall make written recommendations regarding plan design changes in the employee benefits program to the City Council no later than April 1st of each year.

48.1.7 The City Council shall retain the discretion to implement or reject any of the committee's recommendations. In the event the committee makes a recommendation that is consistent with the committee's authority, is actuarially sound and meets all the requirements of federal, state and local laws, and Council rejects the recommendation, any reductions in plan costs that may have occurred due to the change in plan design, will be treated as having occurred for the purposes of calculating the maximum City contribution under this Agreement. These costs will be calculated by evaluating the premiums and/or rates as if the changes had occurred, the rates and/or premiums absent the changes, and the number of participants under the plan(s) involved. (For example, if the self-insured plan two party rate would be $298 per employee per month with the addition of a benefit design change "X", but Council rejects the design change and therefore the two party rate is $350 per month per employee, the City contribution will be increased $52 per month per employee on the self-insured plan to give credit for the change.)

48.2 Benefits and Eligibility

48.2.1 Permanent full-time officers shall be eligible for medical, dental, vision and life insurance coverage the first of the month following thirty (30) days of eligible service. Medical, dental, vision and life insurance benefits will be paid at 100% of the City contribution for those officers who have a Standard Hours designation of at least seventy-two hours in a pay period in a benefits eligible, budgeted position.

48.2.2 Permanent part-time officers will be eligible for medical, dental, vision and life insurance coverage the first of the month following 174 hours of eligible service. Medical, dental, vision and life insurance benefits will be paid at 50% of the City contribution for any permanent officer who has a Standard Hours designation of at least forty hours but less than seventy-two hours in a pay period in a benefits eligible, budgeted position.

48.2.3 Medical, dental, vision and life insurance benefits may be denied to officers who are in a pay status for less than eighty (80) hours during a calendar month by the withholding of City-paid premiums for the subsequent month.

48.2.4 Upon the effective date of this provision, officers shall be afforded the following medical benefits:

48.2.5 At the City's sole option, officers shall continue to be eligible to participate in the City Select plan after the effective date of this Article until no later than June 30, 2004. If the City elects such option, the City shall pay the difference between City Select plan costs and the contribution described in Article 48.3.

48.2.6 Commencing no later than 30 days following the effective date of this provision, the City and the PPA agree to meet to discuss alternate health care plans, specifically including point of service plans and medical savings accounts. The parties agree to cooperate in an effort to examine and, if requested by either party, request bids for alternate health care plans. At the PPA;s option, the City shall, on July 1, 2004, provide an additional health care plan from among those studied by the parties, subject to the premium allocation provisions of Article 48.3.

48.2.7 The City shall provide to PPA members dental and vision coverage, with benefit levels no less than the most generous benefit levels afforded to non-represented employees.

48.3 City Contribution Plan Costs

48.3.1 For the plan year commencing July 1, 1999, the City shall make contributions to the Health Fund for each self-insured medical plan participant in the amounts set forth below: On the effective date of this article, and through June 30, 2004, the City shall make the following contributions to the Health Fund for each self-insured medical plan participant in the amounts set forth below:

Medical One Party $210.38 $260.71 per month

Two Party $414.68 $513.89 per month

Family $558.57 $692.20 per month

Dental One Party $42.63 $52.83 per month

Two Party $73.38 $90.93 per month

Family $124.29 $154.04 per month

Vision One Party $4.64 $5.75 per month

Two Party $8.37 $10.37 per month

Family $11.26 $13.96 per month

Total One Party $257.65 $319.29 per month

Two Party $496.44 $615.19 per month

Family $694.11 $860.19 per month

48.3.2 The City's total contribution for insured plan participants shall be limited to the actual insured plan premium rate, not to exceed the amounts set forth above. Should the insured plan premiums exceed the cost of the City's self-insured plans, the parties agree that the Labor/Management Committee will use its best efforts to control the cost of the insured plans, including consideration of replacement of the current insured plans with other insured plans, or with new self-insured plans. Effective July 1, 2004, the City's total contribution for insured plan participants shall be the dollar value of its contribution effective July 1, 2004 under Article 48.3.3 for the benefits listed in Article 48.2.4 and 48.2.7.

For example, if the total costs of the benefits in Article 48.2.4 and 48.2.7 are $1,000, Article 48.3.3 would require the City to pay the first $950 of those costs. Thus, the City's contribution for insured plan participants would be limited to the first $950 of the premiums or costs, with the participating member paying any excess premiums or costs above $950. Under this example, if the costs of the insured plan were $945, the City would pay all $945 of the costs of the plan.

48.3.3 Effective July 1, 2004, the cost of the provision of the benefits listed in Articles 48.2.4 and Article 48.2.7 shall be divided as follows: 95% of the costs shall be paid by the City, and 5% of the costs shall be paid by the PPA member. For the purposes of this article, "costs" and "premiums" shall be calculated based upon the PPA's claims data, together with administrative and other costs routinely taken into account in calculating health care expenses.

48.3.4 Should the PPA request the implementation of an additional health care plan under Article 48.2.6, the City's total contribution for participants in the additional plan shall be the costs of the plan, but in any case no more than the dollar value of its contribution under Article 48.3.3 for the benefits listed in Articles 48.2.4 and 48.2.7. If the City chooses to insure the additional health care plan, any additional administrative costs incurred by the City by virtue of maintaining the additional plan shall be considered as "costs" under this section.

For example, if the total costs of the benefits in Article 48.2.4 and 48.2.7 are $1,000, Article 48.3.3 would require the City to pay $950 of those costs. Thus, the City's contribution for additional plan participants would be limited to the first $950 of the premium or costs, with the participating member paying any excess premiums or costs above $950. Under this example, if the cost of the additional plan were $945, the City would pay all $945 of the costs of the plan.

48.3.3 Effective July 1, 2000, the City contribution rate shall be adjusted to reflect the full annual percentage increase in the Portland CPI-W as measured by the index for January 2000 and 2nd Half 1999. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than four and one-half percent (4.5%). For the plan year commencing July 1, 2000, the City shall make contributions to the Health Fund for each self-insured medical plan participant in the amounts set forth below:

Medical One Party $218.16 per month

Two Party $430.02 per month

Family $579.24 per month

Dental One Party $44.21 per month

Two Party $76.10 per month

Family $128.89 per month

Vision One Party $4.81 per month

Two Party $8.68 per month

Family $11.68 per month

Total One Party $267.18 per month

Two Party $514.81 per month

Family $719.79 per month

48.3.4 Effective July 1, 2001, the City contribution rate shall be adjusted to reflect the full annual percentage increase in the Portland CPI-W as measured by the index for January 2001 and 2nd Half 2000. However, in no event shall the contribution rate increase be less than two percent (2%) or greater than four and one-half percent (4.5%).

48.3.5 Until June 30, 2004, and subject the provisions of Article 48.2.5, if If the City's contribution is less than the self-insured or insured plan costs, the difference shall be paid by officers through a monthly payroll deduction. In the alternative, until June 30, 2004, if the City's contribution is less than the self-insured or an insured plan costs, the committee may elect to have the difference paid from any available excess reserves in the Health Fund. For purposes of these calculations, "plan costs" for the self-insured and insured plans shall be defined to include domestic partners insurance, and insured and self-insured medical, dental, vision and prescription drug benefit plans. Subsequent to June 30, 2004, any portion of plan costs paid by officers under the terms of this article shall be paid through a monthly payroll deduction.

48.4 Domestic Partner Benefit. Effective July 1, 1994, benefit coverage for domestic partners will become available. Availability of domestic partner benefit is subject to continuing availability from the City's employee benefit insurance carriers. The committee will recommend eligibility rules governing domestic partner benefit coverage to the City Council. The benefits described in Article 48.2 shall include domestic partner coverage.

48.5 Documentation of Contributions. Through June 30, 20-04, Tthe amount the City shall contribute to the Health Fund for each self-insured medical plan participant shall be established annually and will be documented in the form of a Memorandum of Agreement.

48.6 Health Fund Reserves

48.6.1 The Health Fund shall be maintained with adequate reserves to meet fund obligations, which include claims, Incurred But Not Reported Claims Reserves, and Large Claim Reserves. The committee shall make recommendations to the City Council on creating other reserves as appropriate.

48.6.2 The term "excess Reserves", as used in this Agreement, shall be defined as the monies in the Health Fund which are not needed to meet fund obligations. Excess reserves shall remain in the Health Fund, but shall be subject to separate reporting to the committee..

48.6.3 The Health Fund and all reserves associated with the Fund must be maintained in an interest bearing account. Fund reserves shall be pooled, and shall not be allocated on an individual employee or employee group basis.

48.6.4 Effective July 1, 2004, the PPA and its members shall relinquish all interest in the Health Fund reserves.

48.7 Retiree and Survivor Benefits

48.7.1 The City shall make available to a retired officer, spouse and children, or to the surviving spouse and children, or to the surviving spouse, the same medical, dental, and vision benefits offered to active officers. The cost of the plans shall be borne by the retiree or his/her spouse.

48.7.2 In order to be eligible to receive the retiree health coverage provided for herein, the retiree must have had coverage under one of the City's active employee health plans in the month preceding his/her retirement. Retiree health coverage must be requested within 60 days of retirement unless the retiree/spouse has had other employer-sponsored group coverage continuously between the retiree's effective date of retirement and the date when the coverage described above is to commence.

48.7.3 Coverage shall continue to be available to a retired officer until the retiree becomes eligible for federal Medicare coverage. Coverage shall continue to be available to a retiree's surviving spouse until the spouse is eligible for federal Medicare coverage. Dependent coverage for the retiree's unmarried children shall continue to be available until the retiree's child reaches the age of majority under the applicable health plan. In the event that any coverage provided to a retiree or a retiree's surviving spouse is terminated by the retiree/surviving spouse prior to the time the retiree/surviving spouse becomes eligible for federal Medicare coverage, the future availability of such coverage will be contingent upon the retiree or retiree's surviving spouse maintaining continuous coverage through some other employer-sponsored group health plan between the date of termination and the date the retiree or retiree's surviving spouse wishes to re-enroll in a City-provided health plan.

48.7.4 A retiree or a retiree's surviving spouse who elects to participate in an insured health plan maintained by the City (e.g., Kaiser) will pay rates charged by the insurer for participants in their age group. If the insurer charges a higher rate for participants who are over 65, the City will allow the participant to switch to its self-insured plan. A retiree or a retiree's spouse who elects participation in a self-insured health plan offered by the City will pay the rate charged for active employees.

48.8 The City shall provide to the spouse and dependent children of an officer who is killed on the job, the same medical, dental and vision benefit plans available to active officers. The City agrees to continue the City contribution for the spouse and dependent children until the spouse reaches age sixty-five or remarries and for each dependent child to the age which meets the eligibility requirements of the health plan in which they are enrolled.

48.9 The promise of the City to provide insured plans is dependent upon the continuing availability of such plans from an insurance carrier and the qualification by the retired officer with the plan while the retiree was employed with the City. Should an insurance carrier terminate the plan, the City shall attempt to replace it.

48.10 Life Insurance

48.10.1 The City shall provide each officer with a life insurance policy; said policy shall be secured and maintained in accordance with the City's existing practices.

48.10.2 The value of the policy shall be no less than $50,000 and if greater, shall be such amount as established by the City Council upon the recommendation of the Labor Management Benefits Committee.

48.10.3 The City shall make available supplemental life coverage on a voluntary, employee paid basis.

48.11 Deferred Compensation. The City shall allow officers under this contract to participate in the Deferred Compensation Program that is currently available to officers. However, if the program is determined not to be allowable as a tax deferral under the Internal Revenue Code, the participating officer shall hold the City and the unions harmless against any and all claims, demands, or other forms of liability arising as a result of any invalidation of the terms and conditions of the Program.

48.12 Federal Health Legislation. If the Federal Government enacts federal health legislation, or if any taxing authority taxes or otherwise limits or restricts health care benefits paid by the City, the City and the Association will immediately negotiate on the effect of that legislation as it pertains to this Article.

48.13. Tax Sheltering. The City shall offer to PPA members the opportunity to participate in tax sheltering and/or avoidance health care programs and accounts, under the same terms and conditions provided to non-represented employees.

48.14 Disability Insurance. The City shall modify the benefits plan to include the addition of disability insurance for officers if recommended by the Labor/Management Benefits Committee and approved by the Portland City Council. Effective Date. Unless otherwise specifically provided in this article, this article shall be effective on the date of the receipt of the decision of the interest arbitrator selected by the parties to resolve disputes between them as to their contract to commence on July 1, 2002.

B. Discussion of Health Benefits

1. Selected Elements of the City's Offer

The City seeks to implement one common health plan for all city employees in an effort to garner economic advantages of a single risk pool. In the Employer's view, a fundamental difference between the two Last Best Offers on health benefits is that the City's approach "is an egalitarian one" in which the lowest paid employee in the city "will have access to all the same health benefit options as the Mayor." (See Tr. Sept 12, 2003, pp. 48-49.) The City views the Association as taking the approach of separatists. It is clear from the record, however, that not all employees have access to all of the same health benefits. (See, e.g., Tr., Nov. 14, 2003, pp. 115-116.)

Using a two percent "floor" and a ten percent "ceiling," management proposes to adjust city contributions to the Health Funds annually based on the Portland Medical Care CPI in the third year of the contract. The City also offers to increase its contribution for employees on enrollment by 15.1%. Mercer Human Resource Consulting is projecting a 13% average increase in health benefit costs for 2004. (See BNA, Daily Labor Report, No. 245, 12/03, pp. C1-C3.)

The City's proposal includes a significant change in the design of the health benefits plan. Management's objective is to realize savings of 25% over the prior health plan. For example, the current plan has no deductibles, an amount an employee pays before medical expenses are reimbursed. The new insurance plan calls for an individual deductible of $150 and $450 for a family, amounts on which both health benefit proposals are in agreement. The City's new insurance plan also changes the co-payment of medical expenses to an 80/20 plan. Both proposals call for the insurer to pay 80% and employees to pay 20% of medical expenses.

A hotly debated proposed change is in the City's maximum out-of-pocket limits. Currently, the limits are at a $600/$1700 level, so that during the plan year an individual will not pay more than $600 nor a family more than $1700 out-of-pocket for medical expenses covered by the health plan and incurred with a network provider. The City's offer elevates these amounts to an $1800/$5400 level. It also calls for monthly premium co-payments of $11, $22, or $33, depending on the level of coverage. Health care premium costs for the first two years would be effective on an employee's enrollment in a plan. Should an insurance plan cost more than the City's contribution, employees would pay the difference, unless, of course, (1) the LMBC recommends using Health Fund reserves, if any are available, to pay the difference and (2) the City Council adopts the LMBC recommendation.

2. Selected Elements of the Association's Offer

In 1994, the parties formally established a labor-management benefits committee, commonly called the LMBC. Comprised of 14 representatives from among all city employees, "the LMBC has the authority to make written recommendations to the Portland City Council regarding health plans, as well as the use of health fund reserves; but the Council retains the right to reject any of these recommendations." (See Tr. September 12, 2003, p. 50.) The Employer also established a Health Fund. The Health Fund receives contributions from the City, and the funds, then, are disbursed to pay the cost of benefits.

The Association's ardent desire is to end its participation in LMBC and to discontinue receiving any benefits from the Health Fund. Its proposal also seeks savings of 20% or more over the prior health plan, and it is the belief of the Association that this proposed reduction in health care benefits is the equivalent of more than a 4% wage reduction. Examples of cost-saving methods in the Association's proposal include a use of deductibles, insurance premium co-payments, and out-of-pocket maximum limits increasing from the current level of $600/$1700 to a level of $1000 per person and $2500 per family. The Association also believes its proposal would increase premium co-payments more than the City proposes in its offer. City contributions, according to the Association's proposal, would be calculated from the effective date of the contract.

3. The Public Interest

Among public interests intended to be advanced by statutory arbitration in Oregon are the development of harmonious and cooperative relationships between the City and its law enforcement personnel. As an extension of collective bargaining, this method of dispute resolution helps alleviate strife and unrest. Selection of the Last Best Offer package that best resolves this public safety dispute lessens potential injury to the public and encourages practices fundamental to the peaceful adjustment of economic and non-economic differences between the parties by fostering a stable bargaining relationship between them. These legislative goals, set forth in ORS 243.650, are best advanced by the Association's proposal on health benefits.

The Association proved a compelling need to cease to be a part of the Labor/Management Benefits Committee. Established in 1994, the LMBC has not functioned well in recent years. Comprised of 14 members, it does not provide the Association with an adequate opportunity to influence health benefit policies of concern to members in its bargaining unit. While representing almost 19% of employees affected by LMBC recommendations, the Association holds only one of 14 votes on the committee. Nonrepresented employees also comprise almost 19% of employees covered by LMBC decisions but hold seven votes, for 50% of the total vote on the committee. Despite a dissent from the Association, the LMBC might, nonetheless, make a recommendation to the City Council, although the Council is not necessarily required to adopt the recommendation. (See Employer's Exhibit E-H.6, p. 1.) It is in the public interest for management to communicate more directly with leadership of this particular bargaining unit about health benefit issues, and the Association's continued participation in the LMBC does not advance this goal.

Moreover, the LMBC has manifested signs of organizational distemper in recent years. An expert (with a MBA in actuarial science from the Wharton School of Finance whom the Association retained in this case but who also advises city and state employers) concluded that, among represented employees, "there was a lack of understanding of the

processes . . ." LMBC is charged with overseeing. (See Tr., 2904, pp. 74; 90-91; and Association's Exhibit No. 6-99.) In one instance, a member of the City Auditor's staff and an outside consultant to the Health Fund hired by the City disagreed about the amount in the fund to the tune of

$ l.8 million. In another instance, the Health Fund was shorted $1.2 million in a year; and the error had existed for, perhaps, as much as a decade. (See Association's Exhibit No. 6-92.)) The LMBC played no leadership role in resolving these problems or in recommending procedures to avoid their repetition. (See Tr., February 9, 2004, pp. 77-79.) The expert also concluded that represented employees did not attend LMBC meetings as regularly as nonrepresented representatives, and some even sent other individuals who, then, were permitted to cast a vote.

Nor has the LMBC lodged a challenge before the City Council to what is called the Beneflex Plan. In the past, the Beneflex Plan has not reflected an egalitarian design. What Beneflex does is allow certain employees who have a spouse with insurance coverage to opt out of the health benefit plan and, instead, to receive a cash payment. The expert concluded that, on average, such a plan design "would increase costs to the City." (See Association's Exhibit No. 6-97, p. 5.) Beneflex also deprives remaining employees covered by the Health Fund of the positive health experience of those who opt out. The expert concluded that Beneflex Plan costs in 1998-99 were approximately $l.6 million. ( See Tr., February 9, 2004, p. 73; and Association's Exhibit No. 6-91, p. 1.) Despite grave concerns, the LMBC failed to recommend a solution to the City Council which the Council could consider adopting. Even though there were substantial concerns, the LMBC exercised no effective leadership in the dispute.

Not only the Association has serious misgivings about the leadership of LMBC. Doubts about the effectiveness of the LMBC among bargaining unit leaders throughout the city also undermine the vitality of the City's offer with regard to health benefits. In November of 2003, concerns surfaced about the fact that the LMBC had no role in the City's hiring of a new Benefits Manager. (See Association's Exhibit No. 6-82.) Several months earlier on February 18, 2003 leaders of major work groups wrote the City Council "to identify a number of concerns that we have about the way the LMBC has been functioning." (See Association's Exhibit No. 6-95, p. 1.) Among concerns voiced by representatives of virtually every major bargaining unit in the city were: (1) the LMBC, according to these representatives, was not treated by management as a meaningful forum; (2) management representatives on the LMBC appeared to be engaged in bloc voting, instead of engaging in a good faith examination of issues; (3) it was difficult to obtain data for decision-making; and (4) there was a feeling that what was designed to be a collaborative forum had been depersonalized to the point of irrelevancy. Such problems may have been a contributing factor in the failure of the LMBC to oversee fiscal matters directly affecting health benefits of employees with due diligence.

With regard to the alleged "separatist" approach of the Association concerning health insurance, it cannot be ignored that, in September/October of 2001 before the Association officially began bargaining in January of 2002, representatives of both the Portland Firefighters' Association and the Portland Police Association were open to joining DCTU in addressing issues of mutual concern. They were amenable to joining DCTU in coordinated bargaining with the City on the issue of health benefits and gave the City notice of that fact. (See Tr., November 18, 2003, pp. 47-51.) But management rejected the proposal and opted, instead, to negotiate an individual settlement with DCTU in a transaction that made major changes in the parties' treatment of health insurance.

The City now seeks to use the DCTU agreement as a benchmark with law enforcement personnel and asserts that the Association's proposal is flawed, in part, because it separates this bargaining unit from other city employees and the LMBC. Excavating committee decisions and processes is always risky, especially when doing so for a 14 member committee holding diverse perspectives. Trying to understand the complete dynamics of such a policy group is not entirely possible based on reviewing committee minutes. The evidence is clear, however, that the LMBC is not now functioning effectively. While the Committee knew successes in its early years, it has developed a mixed record in recent times; and it is reasonable for members of this bargaining unit to place their health insurance concerns in the care of the Employer and leaders over whom they exercise more direct influence.

Nor would adoption of the Association's proposal eliminate collaborative discussions between the City and the Association about health benefits. Article 48.2.6 of the Association's Last Best Offer requires the parties to discuss such matters. The Association's offer mandates that the parties cooperate in an effort to find an appropriate health care plan for the bargaining unit. Bargaining unit members, of course, would be contractually required to pay all premium costs beyond the 95% premium cost of fixed benefits that would be listed in the parties' collective bargaining agreement. The Association projects that bargaining unit members opting for full family coverage will likely pay $40-$50 monthly above premium payments of the City. As the parties move through a transition period to a more stable plan, it will be necessary for leaders from the City and the Association to engage in extensive collaborative discussions at a level that probably will exceed current collaborative efforts between the City and the LMBC. A fundamental difference, of course, will be that the City is dealing with a smaller group. It no doubt will be necessary for the parties to establish a permanent Health Benefits Committee with an equal representation of leaders from both sides to examine relevant issues of concern to the parties.

The Employer maintains that the Association's group is simply too small to obtain a group insurance rate as economical as the City's current rate. (The Association's absence from the city-wide pool of employees might increase the City's cost for the city-wide pool by approximately 0.16-0.17% over the original CityCore rate. (See Employer's Exhibit E-H 95, p. 1).) The City also retained an insurance expert, and he stated that, as the size of an insured group declines, "the unpredictability of the group and the health care risk increases." (See Tr., February 19, 2004, p. 151.) He testified as follows:

QUESTION: Are you saying that, even assuming the PPA's good claims experience, that would not offset the risk based on the PPA's group size?

ANSWER: No, it would not, because, again, we already factored into this analysis (using a 10,000 employee model, calculated 10,000 times) the experience, the actual claims experience of the self-funded PPA members and COBRA and retirees. (See Tr., February 19, 2004, p. 168.)

The Association responded that the "10,000 employee" model used by the City's expert and the analysis in the expert's report are not probative because the underlying premise is incorrect, especially with regard to the city-wide loss ratio. It may well be that the model used by the Employer's expert incorporated some incorrect data. Even apart from that fact, the expert generally failed to be persuasive that per employee costs of health insurance for all city employees will be lower than the per employee cost for members of this bargaining unit if the Association's "health benefits" proposal becomes a part of the parties' agreement. Even the City's Benefits Manager recognizes that this bargaining unit is a viable group for purposes of health insurance rating. (See Tr., November 14, 2003, p. 238.) Assuming adequate stop-loss insurance (protection from the risk of excessive losses to a self-insured health plan), the Benefits Manager agrees that the actuarial risk of a large claim is no different for a group of 1,000 or 5,000 employees. (See Tr. November 14, 2003, pp. 239-241.) The Association's insurance expert believes that a group the size of this bargaining unit not only would be ratable but also is a highly attractive prospect to health insurance carriers. (See Tr., March 5, 2004, p. 97.)

The Employer also believes that the Association's proposal is too vague to be implemented. But language in Article 48.2.4, 48.2.5, and 48.2.6 provides clear-cut guidelines for the parties to follow and offers more clarity in many respects than was contained in the 1999-2002 collective bargaining agreement between the parties. Much of the language is identical to the City's verbiage and seems clear on its face. At the same time, virtually no insurance proposal in a contract answers all questions between parties; and there is a persistent need to engage in collaborative dialogue. This fact, however, is a strength, not a weakness of the proposal. It is such good faith communication and problem-solving that help keep a collective bargaining relationship on an even keel. All the essential elements for implementing the Association's proposal are contained in its version of Article 48, and it is unrealistic to demand that every minor technical question about insurance coverage be set forth in the labor contract. When a state supreme court justice can say, "I can't understand half of my insurance policies," it is setting too high a standard to insist that every nuance of a health care policy be expressed in a collective bargaining agreement. (See Gerhardt v. Continental Insurance Company, 225 A.2d 328 (1966), and Jury Verdict Weekly News, January 13, 1969,

p. 3.) All the essential components are in the proposal.

Comparability data offer some help in evaluating the two Last Best Offers on health insurance. With respect to out-of-pocket maximums, it will be recalled that the current level is $600/$1700; and the Association proposes to increase those amounts to $1000/$2500. The City offers to increase those levels for an individual to $1800 (meaning an employee would not pay more than $1800 a plan year for covered medical expenses) and for a family to $5400 (meaning a family maximum for covered medical expenses would not exceed $5400). It is unclear whether the Employer's proposal would require an employee to pay the $150/$450 deductible in calculating the out-of-pocket maximum. If so, the out-of-pocket maximum is really a limit of $1950/$5850.

Comparability data show the following pattern:

OUT-OF-POCKET MAXIMUMS

(Out of State Cities)

Jurisdiction Individual Family

Cleveland $ 0 $ 0

Long Beach $ l00 $ 300

Oakland $1500 $3000

Oklahoma City $1200 $3400

Sacramento $ 100 $ 300

Seattle $ 95 $ 285

Average $ 499 $1214

City's Offer $1800 $5400

Association's Offer $1000 $2500

Within the State of Oregon, "comparable communities" are those of a similar character having employees performing "similar" services with the same or nearest population range. While there is no statutory requirements that in-state comparisons of a city be made only with cities in Oregon, the legislature achieved the same result by including a requirement in the law that employees in comparable "communities" perform similar services. Counties and cities in Oregon are generally sufficiently dissimilar so that employees in the two entities should not be compared, unless a party offering data from a different type of political subdivision within the state proves the similarity of duties.

The Association failed to prove that employees in Multnomah and Washington counties perform similar duties as those performed by Portland law enforcement personnel and that the counties have characteristics similar to Portland's. The Oregon public sector collective bargaining law does not state that employees in a city must be compared with county employees merely based on the fact that a county and a city help form a common labor market. The law, instead, sets forth as its sine qua non that employees in both jurisdictions perform "similar" duties in similar communities or cities. When cities and counties have substantially overlapping boundaries, there, in fact, may be similar duties performed by the respective employees. Once, however, a party compares itself with personnel from a significantly different political subdivision within the state, it becomes the burden of the party to establish that the "similar services" test has been met. Such proof was not forthcoming in this case, and Multnomah and Washington counties have not been used as comparable communities under the "similar services" test but have been accepted as part of the relevant labor market.

Comparability data from relevant in-state communities with regard to out-of-pocket maximums show the following:

OUT-OF-POCKET MAXIMUMS

(In-State Communities)

Jurisdiction Individual Family

Beaverton $1000 $2000

Eugene $ 750 $ 750

Gresham $ 700 $1400

Hillsboro $ 600 $1200

Salem $1100 $3300

Average $ 830 $1730

City's Offer $1800 $5400

Association's Offer $1000 $2500

Deductibles (what an employee must pay before an insurance plan begins paying for medical expenses) can also be compared with other communities. Deductibles, of course, serve to get an employee's attention with respect to using medical services carefully and, accordingly, aid in cost containment. Comparability data show the following pattern:

DEDUCTIBLES

(Out-of-State Cities)

Jurisdiction Individual Family

Cleveland $ 0 $ 0

Long Beach $ 0 $ 0

Oakland $ 10 $ 10

Oklahoma City $200 $400

Sacramento $ 0 $ 0

Seattle $150 $450

Average $ 60 $143

City's Offer $150 $450

Association's Offer $150 $450

DEDUCTIBLES

(In-state Communities)

Jurisdiction Individual Family

Beaverton $ 0 $ 0

Eugene $100 $300

Gresham $200 $600

Hillsboro $100 $300

Salem $100 $300

Average $100 $300

City's Offer $150 $450

Association's Offer $150 $450

Co-pay of insurance premiums by employees is another way of helping to control costs of a health plan. Comparability data with regard to co-payment of premiums show the following:

CO-PAYMENT OF PREMIUMS

(Out-of-State Cities)

Jurisdiction One Party Coverage Two Party Coverage Family

Cleveland $25.09 $168.91 $180.22

Long Beach $ 0 $ 0 $ 0

Oakland $ 0 $ 0 $ 0

Oklahoma City $65.85 $129.27 $176.83

Sacramento $ 0 $ 37.00 $ 0

Seattle $ 0 $ 0 $ 0

Average $15 $56 $60

City's Offer $11.00 $20.00 $ 33.00

Association's Offer $12.77 $25.00 $ 34.00

CO-PAYMENT OF PREMIUMS

(In-state Communities)

Jurisdiction One Party Coverage Two Party Coverage Family

Beaverton $ 0 $ 0 $ 0

Eugene $ 0 $ 0 $ 0

Gresham $ 0 $ 0 $ 0

Hillsboro $ 0 $ 0 $ 0

Salem $ 0 $ 0 $ 0

Average $ 0 $ 0 $ 0

City's Offer $11.00 $20. $33

Association's Offer $12.77 $25 $34

While not a definitive guideline, comparability data in this case are instructive. They show that, with the exception of out-of-state insurance co-payments, these selected elements of the Association's proposal are well within the range of reasonableness. In most instances, the Association's offer is not as good as what employees have achieved in comparable cities and communities. With regard to premium co-payments, the Association's offer is slightly more advantageous to cost containment in comparison with out-of-state jurisdictions; but the City's offer is not significantly different. With respect to in-state comparable communities, the Association's proposal requires bargaining unit members to pay more than similar employees in other Oregon communities.

Of additional concern is the fact that adoption of the City's proposal would create a more uncertain future for the parties with regard to health insurance than does the Association's proposal. City representatives themselves recognize that the Employer's proposal will "not solve the cost of the continuing problem [of health insurance]; rather, it would merely extend the life of the health-fund reserve." (See Tr., September 12, 2003, p. 52.) Ms. Ruth Roth, a policy analyst with the City's Office of Management and Finance, questioned the fiscal prudence of the existing system on which the City's proposal is premised. She believes that the current Health Fund structure provides "an unstable system." (See Tr., November 26, 2003, p. 11.) Nor do reserves currently in the Health Fund provide long-term protection against a projected 15% rate of increase for combined medical and drug costs because, as Ms. Roth stated, "The reserves are going to be exhausted at some point." (See Tr., November 26, 2003, p. 18.) The totality of the record supports a conclusion that it is in the public interest for this bargaining unit to begin a fresh approach as detailed in its Last Best Offer.

Salary rates for classifications in Schedule "A" for the period July 1, 2002 1999 to June 30, 2003 2000 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the index for January 2002 1999 and 2 nd Half 2001 1998 for the City of Portland, Oregon, published by the Bureau of Labor Statistics, U.S. Department of Labor. However, in no event shall the salary increase be less than two percent (2%) or greater than five (5.0%).

(NOTE; The CPI-W for this period was 2,2 1.1 %.

2. In addition to the 1.1% increase in paragraph 1 above, officeres will receive an additional one time increase of. 9% effective July 1, 1999. The.9% increase will not be added to the base when computing the FY 2000/01 wage rates. The purpose of the additional .9% increase is to give officers an "early implementation" of the 2% "floor" in the FU 2000/01 CPI increase in Paragraph 3 below.

Wage rates, including the "early implementation" rates, are reflected in the "1999-2000 Schedule "B" Wage Rates" below. These are the rates that all officers will be paid from July 1, 1999 through June 30, 2000. However, the July 1, 2000 increase in wages will be based on applying the increase to the Schedule "A" Wage Rates.

Salary rates for classifications in Schedule "A" for the period July 1, 2000 to June 30, 2001 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the index for January, 2003 2000 and 2 nd Half 2002 1999) for the City of Portland, Oregon, published by the Bureau of Labor Statistics, U.S. Department of Labor. However, in no event shall the salary increase be less than two percent (2%) or greater than four and one half five percent (5.0 4.5%) (Note The CPI-W for this period was .4% 3.7%.)

Salary rates for classifications in Schedule "A" for the period July 1, 2004 2001 to June 30, 2005 2002 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the index for January, 2004 2001 and 2 nd Half 2003 2000) for the City of Portland, Oregon, published by the Bureau of Labor Statistics, U.S. Department of Labor. However, in no event shall the salary increase be less than two percent (2%) or greater than four and one half five percent (5.0 4.5%).

6. In the event that City revenue sources should be decreased by the passage or impact of a tax limitation measure, legislatively mandated change, cut back in Federal and/or State revenue sharing, or any other conditions causing a worsening of the City's financial position, the City Council and the signatory labor organizations agree that they will meet and discuss the economic impact and, by mutual agreement, will put forth a good faith effort to arrive at alternatives to a reduction in the work force.

7. In the event that a current city employee is appointed to the Police Officer classification, the officer's pay rate shall be the step within the pay range which represents at least a 3% increase over the officer's regular rate in the officer's former classification, provided that in no event shall the new rate of pay exceed the maximum rate for Police Officer.

1. Effective July 1,19992002, Schedule "A" wage rates will be revised as follows:

Salary rates for classifications in Schedule "A" for the period July January 1, 1999 2002 to June 30, 2000 2002 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the annual change in the index for between January 1999 2nd Half 2000 and 2nd Half 1998 2001) for the City of Portland, Oregon Portland-Salem, OR-WA, published by the Bureau of Labor Statistics, U.S. Department of Labor. However, in no event shall the salary increase be less than two percent (2.0%) or greater than five percent (5.0%). (NOTE; The CPI W for this period was 1.1%.)

2. In addition to the 1.1% increase in paragraph 1 above, officers will receive an additional one time increase of .9% effective July 1, 1999. The .9% increase will not be added to the base when computing the FY 2000/01 wage rates. The purpose of the additional .9% increase is to give officers an "early implementation" of the 2% "floor" in the FY 2000/01 CPI increase in Paragraph 3 below.

Wage rates, including the "early implementation" rates, are reflected in the "1999-2000 Schedule "B" Wage Rates" below: These are the rates that all officers will be paid from July 1, 1999 through June 30, 2000. However, the July 1, 2000 increase in wages will be based on applying the increase to the Schedule "A" Wage Rates.

Salary rates for classifications in Schedule "A" for the period July 1, 2000 2002 to June 30, 20012003 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the annual change in the index for January, 2000 between 2nd Half 2001 and 2nd Half 1999 2002 for the City of Portland, Oregon Portland-Salem, OR-WA, published by the Bureau of Labor Statistics, U.S. Department of Labor, plus 1.0%. However, in no event shall the portion of the salary increase attributable to the CPI be less than two percent (2,0%0 or greater than five percent (5.0%). four and one half percent (4.5%). Note: The CPI-W for this period was 3.7%.)

Salary rates for classifications in Schedule "A" for the period July 1, 20012003 to June 30, 20022004 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the annual change in the index forbetween January,2001 2nd Half 2002 and 2nd Half 20002003) for the City of Portland, Oregon Portland-Salem, OR-WA, published by the Bureau of Labor Statistics, U.S. Department of Labor, plus 1.0%. However, in no event shall the portion of the salary increase attributable to the CPI be less than two percent (2.0%) or greater than four and one half percent (4.5%) five percent (5.0%).

64. In the event that City revenue sources should be decreased by the passage or impact of a tax limitation measure, legislatively mandated change, cut back in Federal and/or State revenue sharing, or any other conditions causing a worsening of the City's financial position, the City Council and the signatory labor organizations agree that they will meet and discuss the economic impact and, by mutual agreement, will put forth a good faith effort to arrive at alternatives to a reduction in the work force.

75. In the event that a current city employee is appointed to the Police Officer classification, the officer's pay rate shall be the step within the pay range which represents at least a 3% increase over the officer's regular rate in the officer's former classification, provided that in no event shall the new rate of pay exceed the maximum rate for Police Officer.

B. "Comparable Communities" Revisited

In arguing for the City's wage proposal, the Employer revisited the issue of comparability. The Employer again maintained that the legislature defined "comparable communities" in terms of population and argued that the law "requires" a selection of out-of-state comparable communities "solely on the basis of population." (See Employer's Post-hearing Brief, p. 50.) If a community has a population in the same range, the City asserts that it is "comparable" with Portland. The statute defines 'comparable communities' only in terms of population, and other indicia of comparability are irrelevant, according to the City. (See City's Post-hearing Brief, p. 100.)

As stated earlier in this report, the City's statutory interpretation gives no meaning to the totality of the first sentence in ORS 243.746(4)(e). The first and second sentences must be construed together. Until an authoritative agency or court provides a different interpretation, it is reasonable to conclude the first two sentences of the law mean that, if a party uses comparability information in interest arbitration, the data must (1) be drawn from the experience of employees performing similar services (although "similar" is not defined); (2) the similar services must be performed in a comparable community or city; and (3) the comparable community or city must have a population in the same range as the home jurisdiction. Likewise, if population of the Oregon city exceeds 325,000, comparability data may be gathered from employees performing similar services in a comparable out-of-state city; and a baseline benchmark is that the comparable city must be of a similar size. The term, "similar size," in ORS 243.746(4)(e)(A) is, itself, ambiguous and possibly can be interpreted to mean more than population.

Without intending to make a fortress of the dictionary, it may help to remember "comparable" means that something is "suitable for comparison." Population alone does not make one city suitable for comparison with another. Beirut, Lebanon and Portland, Oregon are in the same population range. A narrow reading of ORS 243.746(4)(e) that limits comparable communities and cities to a simplistic "population-based" test is inconsistent with the history of interest arbitration in the United States and also ignores the legislative mandate in ORS 243.742 that laws requiring parties to use interest arbitration "shall be liberally construed." The transformation of ORS 243.746(4)(d) by S.B. 750 into ORS 243.746(4)(e) included no express language requiring a "population only" definition of "comparable communities or cities." A "population only" test of comparability would permit parties using out-of-state cities to select a city anywhere in the same population range without regard to location, general character, and cultural or economic differences. For example, Portland, Oregon and Washington, D.C. are cities with a similar population size but are hardly comparable communities. A "population only" interpretation is inconsistent with legislative goals in ORS 246.656 of developing harmonious and cooperative relationships between public employers and employees and alleviating strife and unrest in the workplace. Narrowly drawn, result-oriented interpretations of the "comparability" language in the law will undermine stated legislative goals of the interest arbitration law.

C. Community Policing

Community policing is a central priority to law enforcement personnel in Portland. It is a priority unanimously adopted by the City Council. (See Association's Exhibit No. 7-1, p. 61.) The community policing program in Portland provides a filter through which the parties' Last Best Offers must be viewed. City of Portland policymakers have determined that a strong emphasis on community policing is in the best interests of the public. No evidence submitted to the arbitrator suggested that other in-state or out-of-state comparable communities promote such an approach to law enforcement, and the impact of such a policy needs to be considered in assessing the respective wage offers.

Community policing is in the interest of the public because it promotes voluntary observance of the law. Activities that encourage a willingness to conform to law are based on helping citizens develop and retain a respect for law and law enforcement goals. Many social, political, and economic reasons help explain why some citizens hold the law in disrespect, but unfortunate experiences with law enforcement personnel may play an influential role. As a consequence, an emphasis on community policy affects expectations placed on law enforcement personnel and dramatically influences the fundamental police function in a community.

Community policing affects what services a police bureau delivers. Of course, police must strive to control crime as a central mandate of community leaders. But community policing also asks police personnel to provide many nonemergency services. For example, they are expected to assist stranded motorists or to become conversant with neighborhood leaders, school officials, and shopkeepers. An emphasis on community policing increases the amount of time police personnel devote to human relations in a community. It requires line officers to be more sensitive to creating and maintaining a good police image while, at the same time, responding to diverse needs of sometimes conflicting community organizations without neglecting the foremost tasks of crime control and emergency aid. Chief Foxworth made clear that he expects all Bureau personnel to integrate police functions with public and private social service agencies. (See Tr., February 11, 2004, p. 122.)

To accomplish the complex agenda of community policing, management generally imposes higher expectations on its workforce. Decision-making generally is more decentralized, and discretionary authority of a line officer increases. Officers are expected to develop a variety of flexible responses to problems and to avoid the rigidity of "one size fits all" solutions. They are expected to go beyond narrow considerations and to observe and support community values. No longer may community respect for law enforcement be taken for granted, and police personnel in a community policing system are charged with responsibility for garnering public support. The task of advancing such an agenda is enormously complex and is a legitimate factor in assessing a wage proposal.

Law enforcement personnel charged with community policing responsibilities are being asked to help build and maintain a sense of community. To the extent that law enforcement personnel in comparable communities are charged with a similar agenda, they may provide a point of comparison with Portland; but the arbitrator received no data on the subject. Community policing engages police personnel in community outreach, in working with neighborhood organizations, and in showing a caring spirit. In this sense, such a program imposes the weight of symbolic interactions on police personnel and engages them in helping to define a community. For example, the Bureau now has a Senior Neighborhood Officer program and a Crisis Intervention Team. Police personnel in the City increasingly are used as "first responders" in cases requiring medical assistance. (See Tr., March 5, 2004, pp. 145-162.)

Chief Foxworth has a clear-cut performance expectation that Bureau employees will help citizens with problems that are not police-related matters. In the Chief's view, Bureau personnel "represent the City of Portland." (See Tr. February 11, 2004, pp. 116-117.) They often have more contact with citizens than most city employees and serve as a dominant symbol of governmental power. The Chief testified as follows:

I believe that when officers are not tied up taking calls for service or taking a police report, that in their free time, they be involved in doing what we have referred to as self-initiated activity. And those activities could include doing that outreach, doing those - what we referred to as 1086s - walking a park, getting to know people, developing relationships, and talking to people. It will include going to a youth center and spending time at a youth center, to see what's taking place, and talking to young people at a youth center. It would include going to your neighborhood coalition office, and see the crime prevention specialists that are there, and see what issues they're dealing with, what type of calls they're getting from neighborhood associations and citizens. It would include dropping by a business and introducing yourself to the people that work there

at the business, maybe following up on a particular problem that

that business has been experiencing or that area has been experiencing. (See Tr., February 11, 2004, p. 123.)

No evidence submitted to the arbitrator suggested that personnel in any comparable in-state or out-of-state community are charged with such complicated community-building duties. Bestowing such expectations on employees is praiseworthy and merits consideration in evaluating a wage proposal.

D. Discussion of Selective Aspects of the Two Packages

With regard to wages almost more than any other issue, the parties manifested persistent differences (1) about actual numbers used to make comparisons; (2) about methodology; (3) about the reliability of data and expert analyses of data; and (4) about the meaning of their respective numbers, even if the numbers seemed relatively close. Comments by one highly skilled professional analyst hired by the City to assist in data analysis for this case illustrated the deep divisions about methodologies and numbers when she stated, "The City disagrees with almost every number on all the 32 tables in this [Association] exhibit." (See Employer's Exhibit E-J 61, p. 1.) The comment exemplified the battle of dueling data in which the parties engaged throughout the hearings.

From the number of sworn personnel in the Bureau to the value of an employee's pension, the parties fought over the accuracy and meaning of data. For example, the Association calculated a value of 16.75% of total compensation attributable to an employee's pension. The City rejoined that the cost to the City of providing a pension to police personnel is almost twice that or 30.15% of base pay and 24.88% of total pay. The City's expert added that "there are many ways to measure the cost of a benefit program," and neither the City's nor the Association's expert established that the other's calculation was incorrect or indefensible in theory. (See City's Exhibit E-I 107, p. 1.)

The Employer itself recognized that assigning dollar values to different pension plans "is problematic because of differences in elements, contributions, funding mechanisms, tiers, and countless other variations." (See City's Exhibit E-J 60, p. 1, fn. 3.) When experts as well qualified as these disagree on valuing crucial elements of compensation, it complicates the process of comparisons. Using even the Association's estimate, however, the City compares favorably with in-state comparable communities, if the comparison is isolated to pension contributions. (See City's Exhibit E-J 60, p. 2.)

The parties also joined issue about the value of other benefits, such as premium pay. The City insists that all in a comparable bargaining unit need to receive a benefit in order to compare "apples to apples." The Association rejoined that a benefit received by virtually all in another bargaining unit ought to provide a legitimate point of comparison. For example, the Association argued that virtually every member of the Seattle Police Department receives a 1.5% premium, even though it is paid to employees under different names. The Employer rejected the Association's assertion that such a premium constitutes a part of base pay. (In this regard, it was curious that the City used a 10-hour day to compute holiday comparisons, but only 90% of employees in the Bureau use a 4/10 schedule.) The parties also generated imprecision by sometimes comparing 2002 rates to 2003 rates or 2002 rates to 2004 rates. Differences in the way the parties assigned value to health insurance benefits and whether the City's contribution should be valued at $741 or $960 further complicated comparisons. The Employer would describe itself as generally being 15% ahead of comparable communities in terms of total compensation, while the Association would describe a general lag of 7-9%. ( See City's Exhibit E-I 94, p. 8, and Association's Exhibit No. 7-158, p. 32.)

At the entry level, Portland is considerably behind both in-and out-of-state comparable jurisdictions; but this is not the most insightful point of comparison. While the salary schedule uses an interlocked progression, two-thirds of the bargaining unit are college educated with an average tenure in the Bureau of 11 years. Accordingly, it is reasonable to look closely at this particular benchmark. The parties displayed relative agreement with respect to the accuracy of longevity compensation as well as education and certification pay. It is reasonable to total these data in an effort to make an equitable comparison. If base wages for a 10-year veteran are added to longevity, education, and certification pay, a reasonably accurate, uncluttered comparison can be made between Portland and comparable jurisdictions. Even here a small degree of ambiguity exists because some communities combine education premiums, and some do not. For example, Sacramento combines 5% plus 10% for education and certification pay, but Long Beach gives one or the other, either $350 or $260.

Recognizing the nuances of comparisons generally, comparability data suggest that, at the college, 10 year point of comparison, Portland is 1.56% behind in-state comparable communities and 10.3% behind out-of-state cities. At this significant benchmark, the City is also 2.7% behind its local labor market competitors. While not proper to consider data drawn from Washington communities or Multnomah County under ORS 243.746(4)(e), it, nonetheless, is appropriate to do so as a part of a "local labor market" analysis.

In the arbitrator's judgment, "labor market" data are relevant in this proceeding. Labor market theory attempts to bring rationality to links between supply and demand for labor and has been a highly regarded tool of economists in the United States for almost a hundred years. Labor markets might be studied geographically or occupationally. Evidence in this case suggests that comparable Oregon cities plus Clark, Multnomah and Washington counties as well as Vancouver, Washington constitute a relevant local labor market for Portland. Unrebutted testimony established that the Employer used a "labor market" analysis in past negotiations, and included Washington communities in the analysis. (See Tr., January 21, 2004, p. 91.)

Compensation policy adopted by the City Council in Portland mandates that consideration be given not only to labor market forces but also to the "complexity or difficulty of the work," and the Employer in this particular work group is managing to obtain more work from fewer people. (See City's Exhibit E-I.84, p. 1.) The City recognizes the stress caused by trying to accomplish more with less. For example, the Chief observed:

Detectives are working with fewer resources, numerous cases, and in regard to homicides, they are encountering difficult, if not uncooperative witnesses. (See Association's Exhibit 7-25.)

The number of detectives in the Bureau has been reduced from 125 to 75, and fewer personnel now perform a patrol function. Those who do so now perform such additional duties as collecting "stop data" and entering the information into a computer. (See Tr., February 11, 2004, p. 97.) Uniformed personnel also must now prepare investigative reports and conduct follow-up investigations in non-Measure 11 crimes. Even though Commander Sizer quibbled about the amount of new work, it is clear that management has increased workload expectations for bargaining unit members. (See Tr., November 8, 2003, pp. 85-97.)

Fewer bargaining unit members are responding to greater needs of a larger population in Portland, and it has been necessary for employees to learn new skills and to withstand the pressures of an increased use of overtime. For example, bargaining unit members now need more computer skills in order to be more productive. Using tasars or computers or community policing skills are now established workplace expectations. The path of innovation benefits the public. Despite a realignment of jobs in the Bureau and its potential to demoralize the bargaining unit, gains in productivity have been documented. It is reasonable for the rise in underlying productivity to influence wages received by bargaining unit members. The public benefits from a greater use of new technologies, especially from using more nonlethal methods of responding to violence and from having computers in patrol cars. At the same time, such changes require greater knowledge and often split-second decision-making. On pain of discipline or discharge, employees are expected to select the correct response in what appears to be a seemingly simple situation but suddenly and explosively becomes potentially life-threatening. It is in the public interest to invest more heavily in employees who exhibit such productivity and engage in more complicated decision-making.

It is recognized that indices of performance to assess police services are not easily measurable. Productivity, however, remains an appropriate criterion for consideration in a request for a wage adjustment. In this case, performing more complex work while serving a larger population with fewer personnel than in the past, Bureau personnel have increased their positive response from the community. (See Association's Exhibit No. 7-1, p. 72.) Household victimization rates have decreased, and citizens feel as though there is less crime in the community. The current rate of crime per 1,000 population decreased by half since 1996. (See Association's Exhibit No. 7-3, p. 7.) The number of calls to the department increased by over 50,000 since 1996. Total arrests and arrests per officer increased, and self-initiated activities by police personnel have risen dramatically. (See Association's Exhibit No. 7-7, p. 1.) Yet, the total number of bargaining unit members has decreased, as has the number of officers per 1,000 residents. (See Association's Exhibit No. 7-3.) No persuasive evidence called into question the fact that fewer people in the Bureau are now doing more work while serving a larger population.

Recruitment in recent years has begun to become a concern in the Bureau. It is not yet a problem of major proportions, but the outline of a significant issue exists. Both parties conceded that recruitment of African-American and Hispanics is not now at desired levels, but this may not be entirely an economic issue. Much work needs to be done within the Bureau in this particular area, and the Association's proposal may be more helpful than the City's. (See Tr., February 11, 2004, p. 83.) Environmental aspects of the workplace may do more than mere economics to address this part of any recruitment problem. The eminent Frederick Douglass would find a solution to this problem in the core values and the institutional integrity of the organization.

Of great concern is the fact that the City has forestalled any major recruitment problem to date by lowering entrance requirements. It is remarkable to have a police department in a major city with two of every three sworn officers possessing a college education. Most police officers in the United States are required only to have a high school diploma. A better educated bureau is in the public interest, and advancing this goal requires competitive wages. It is true that the Bureau receives numerous job applications, but not with the same level of qualifications as in the past. Some evidence suggested that highly qualified applicants are not as apt to select Portland today as in times past. (See Tr., January 21, 2004, pp. 217-222.)

Past performance, of course, may be the best indicator of future performance, and the parties debated vigorously the meaning of data on lateral hires. Lateral hires give management actual performance rather than potential performance as an indicator of success, and there is merit in being able to draw to the community officers about whom less speculation is necessary. (At the same time, lateral entries can undermine departmental morale by limiting promotions from within.) But the public is best served by a system that attracts the best qualified persons to a job. A free market is the most efficient means of drawing the best talent in the community to a job, and the Association's proposal does more to create an open market for police talent.

There is no assurance that the Association's proposal would cure any emerging problem with regard to lateral applicants, if one exists. But it should help make Portland more attractive to individuals who are interested in a lateral entry. To the extent a measure helps management rely less on highly speculative predictions in favor of using data from demonstrated prior achievements, such measures are in the public interest. A new recruit from the Academy still must undergo much on-the-job training and self-instruction, and these can be haphazard and often are inadequate. Creating a compelling environment for applicants with prior professional experience and accomplishments may save training time and costs.

But the reality is that no rigid set of criteria will be absolutely predictive of excellent police personnel. Lowering educational requirements, however, is negatively predictive of success, and the Association's proposal will do more to help maximize the chance of hiring excellent and productive Bureau personnel. At least one court has concluded that college-educated officers make better police officers. (See Levy Arlington County, No. 76-2184, 4th Cir., May 16, 1997.) The Association's proposal does more to help the City attract applicants who are able to think, write, and express themselves in addressing social problems they confront in their daily performance of duties.

Troubles of police are favorite topics of the news media. It is in the public interest to eliminate such negative publicity, and one of the best ways to avoid the demoralizing effects of such news reports is to staff the Bureau with emotionally stable, cooperative, self-confident individuals who are well-educated, have common sense, and are able to deal positively with the corrosive effects of workplace stress. The Association's proposal will do more to draw personnel to the Bureau with knowledge and experience, and the better the personnel the less the risk of harm to the community from an improper use of discretionary authority.

Equity requires coupling the increased workload and more complex performance expectations with the Last Best Offer that is most responsive to internal compensation policies, and this is the Association's package. This conclusion finds support not only in the City's own compensation policy but also in comparability data drawn from both in and out of state sources. Nor does the relative magnitude of the costs of the Association's proposal jeopardize the City's ability to pay. The Employer made clear its position that "the City does not have an inability to pay." (See Tr., March 5, 2004, p. 89.) Any significant fiscal change of plans has budgetary consequences, but it is clear from the record that the city has the ability to fund the Association's wage package.

The City enjoys a strong institutional credit rating, and the Association's proposal would not harm it. Moody's Investor Services concluded that Portland qualifies for an Aaa rating on offerings of general obligation bonds. Helping the City earn the high rating is the fact that Portland maintains sufficient reserve funds to give it financial flexibility. The City believes it is exceedingly important to retain its level of reserve funds in order to protect its Aaa bond rating. Adoption of the Association's wage proposal will not impact the credit rating of the City, and the Employer should not be required to drop below the 10% level for contingency reserves in response to funding the Association's proposal. Unrebutted evidence established that, for fiscal year 2003, the General Fund balance was $57.6 million or l4.2% of General Fund revenue. (See City's Exhibit E-J 18, p. 3, and Tr., March 3, 2004, pp. 220-221.) Undoubtedly, budgetary shifts may result from adoption of the Association's proposal, but no persuasive evidence suggested that it would precipitate any sort of fiscal crisis or major change in policy. Budgetary adjustments that might be necessary are justified by compensating employees at a rate more consistent with workload expectations and rates paid comparable workers in comparable communities.

The Association asserted that mistakes in the City's wage proposal make it lawfully unenforceable. The City's proposal allegedly makes reference to wrong dates, requires using a nonexistent Consumer Price Index, and creates ambiguities that make implementation impossible without legal interpretation. Since the Association's Last Best Offer has been adopted, it is unnecessary to decide whether these allegations are correct and, if so, whether they constitute fatal flaws.

VI. Pager Pay (On-Call Pay)

A. Language of the Association's Last Best Offer

ON-CALL PAY

The employer shall compensate officers placed in on-call status at the rate of one hour of compensation at the regular rate of pay for each six hours spent on call, or portion thereof. For example, an officer placed on call for one hour shall receive one-sixth of an hour of compensation at the regular rate of pay. An officer placed on call for six hours shall receive one hour of compensation at the regular rate of pay.

For purposes of this article, "on-call" status means all time when the employer requires the officer to remain available for and to respond to a call to duty, to be immediately reachable by pager or by telephone, and where the employer subjects the officer to possible disciplinary action for failing to comply with either of the foregoing requirements.

Officers who are in on-call status who are called to duty shall be compensated for the time spent on the call to duty as provided elsewhere in this agreement.

B. Meaning of the Proposal

The Association proposes that members of the bargaining unit be compensated for on-call duty. No such compensation currently is paid to law enforcement personnel, and the City seeks to retain the status quo. It is the position of the Employer that the Association's proposal is vague, ambiguous, and not supported by the evidence.

The language of the Association's proposal mandates that the City "shall compensate officers" who are "placed in" on-call status. Employees are to be paid an hour of straight time pay for each six hours of on-call duty. If, for example, management placed an employee in on-call status for an hour, he or she would receive one-sixth an hour of regular pay. The term "on-call" is defined in the proposal. First, the Employer must require an officer to be placed in on-call status. Second, if required by management to be placed in on-call status, an officer must remain available for and respond to a call to duty. Third, the officer must be "immediately reachable by pager or by telephone." Thus, an officer who is required to be in on-call status is subject to disciplinary action for not complying with these express expectations of being placed in on-call status by management.

The City labeled the Association's proposal a "pager pay" proposal, but it is only a quest for on-call pay, according to the Association. It is not a proposal mandating premium pay merely because an officer has been issued a pager or other communication device. Management deliberately must place a bargaining unit member in on-call status, and this requires more than merely being issued a pager. It is the belief of the City that what it means to be "placed" in on-call status is vague and ambiguous.

The Association's proposal, however, states explicitly that "on-call status" arises only when management "requires" an officer to remain available for and to respond to a call for duty. Once given notice of a mandatory assignment, the possibility of discipline looms if an employee refuses to comply with the assignment and its expectations. The proposal is clear that it covers required assignments, not voluntary assignments. The language is new, and how officers responded under past assignments is not an appropriate guideline for defining terms in the new proposal. Education might well be necessary to explain the mechanics of the new provision, but the language is sufficiently clear so that it can be implemented.

C. A Compelling Need

In recent years, management significantly increased its assignments after hours. Employees are expected to respond to police work after an individual completes his or her scheduled shift. In order to meet needs of a larger population with fewer sworn officers, the Employer issued pagers and other communication devices to an increasingly large number of bargaining unit members and expects them to respond within 30 to 60 minutes when paged. It is remaining ready to respond that has caused a conflict between the parties.

The City provides no compensation to employees for remaining ready to respond at a moment's notice. Remaining on-call to respond to the Employer's bidding affects most aspects of life for anyone carrying a pager. Church, Christmas Eve dinners, children's birthdays, anniversaries, and parent-teacher conferences illustrate some of the events that have been disrupted for employees who carry a pager. While some employees are unbothered by such work-related intrusions after hours and respond with alacrity, others find such interruptions and especially the need to remain on constant alert to be highly stressful. The Association proposes that management compensate employees who are required to carry a pager and who risk discipline for not responding immediately to on-call assignments.

Public debate over an employer's intrusion into an employee's off duty hours has persisted in the United States since colonial times, and limitations began to emerge as early as the eighteenth century when journeymen sought to limit a workday to fourteen hours. (See Yoder, Labor Economics 281 (1939).) The current system places employees on call without pay and enables management to meet public needs at no significant cost to the City. As one city manager testified:

QUESTION: There's no economic consequence currently to the Police Bureau for assigning officers after hours responsibilities, is there?

ANSWER: The only economic consequence is the cost of assigning a pager, about nine bucks a month. But, no, not other than that. (See Tr., November 12, 2003, p. 58.)

A veteran of 20 years in the Bureau, Commander David Benson, stated that use of pagers in the Bureau has "increased fairly dramatically" and has become "onerous." Commander Benson testified as follows:

QUESTION: Would you agree with me that the Police Bureau has abused the extent to which it assigned after-hours responsibilities for employees?

ANSWER: We have definitely - as a result of technology, we have falling into a - fallen down a slippery slope, into a trap where we have - in my view, have abused it. (See Tr., November 12, 2003, p. 59.)

Commander Benson's statements were more than an historical comment about an increased use of technology in the Bureau. He conceded that in some areas of the Bureau "there are some people that want to leave (a team) just because they don't want to be tied to the pager." (See Tr., November 12, 2003, p. 53.) The Commander never backed away from his assessment of the problems caused by being on call and being "tied to the pager," and his comments went beyond a mere complaint by employees about carrying new communication devices. His focus was on the effect of being on-call and the limitations it imposes on employees, and the focus of the Association's proposal is on discouraging management from persistently intruding on an officer's private life and on obtaining compensation for remaining ready and alert to respond to such calls.

Chief Foxworth, likewise, believes "there needs to be some compensation for (being in on-call status.)" (See Tr., February 11, 2004, p. 155.) He testified as follows:

QUESTION; Do you understand as well that employees who are in on-call status have to make adjustments in their off-duty lives - everything from, for example, taking separate cars to family functions and athletic events?

I see the corner of your mouth going up. You're familiar with that one, personally, aren't you?

ANSWER: Yes, I do.

QUESTION: O.K. So, I take it, Chief, when we pull all of this and all of the other burdens that are put on an employee who is placed on call - am I correct, then, that it is your position that employees who are placed on call should be compensated for being on-call? Don't you agree with the PPA's particular proposal?

While the Chief did not want to speculate about what constitutes equitable compensation for employees who are placed on call, he believes the current system is unfair.

Clear and convincing evidence established that a problem exists in the Bureau with regard to management's heavy reliance on pagers and other communication devices that intrude on the private life of bargaining unit members. The problem built such volcanic resentment at one point that some employees "didn't answer their pagers." (See Tr., November 7, 2003, p. 130.) One employee testified without rebuttal that, for the past two years, his nights of rest have been interrupted by his pager 80-85% of nights. (See Tr., November 7, 2003, p. 75.)

Paying employees for being placed on-call has more than an economic purpose of additional income. Most importantly, it causes management to organize and plan carefully and to be certain important organizational goals are being advanced by requiring someone to carry a pager or similar device. As a result of long work hours, most North Americans endure a shortage of meaningful time for family, community, and cultural life. If management must pay an employee who is required to adapt family life to off-duty intrusions from work, it discourages too pervasive a reliance on expecting employees to carry and respond to messages from pagers and similar devices. Where management has no economic disincentive, it is easy for an organization to disrupt family life and to be insufficiently sensitive to stresses caused by an employee's standing ready to sacrifice normal hours with family and friends. Evidence suggested that the Bureau has responded to insufficient resources, in part, by relying too heavily on placing employees in on-call status. Chief Foxworth made clear that it is crucial for some personnel to be equipped with a pager or similar device but also that, "if you had to re-examine and go back and look at issuing of pagers, (you would) maybe take off that (required) list." (See Tr. February 11, 2004, p. 153.)

On-call compensation is not for service performed after responding to a call but for remaining in a state of constant readiness to provide service on unduly short notice and without regard to an employee's off-duty activities. It is being required to carry a pager or similar device on pain of discipline and remaining alert for instructions that occasion compensation. Compensation is for remaining ready for the intrusion and responding immediately.

One witness illustrated the persistent complaint of many who carry pagers when he stated:

If you're a conscientious person and you're on call, I think it can be very stressful because you're, you know, wanting to do a good job and you're wanting to be able to function immediately and you're wanting to be able to answer the right questions and get ahold of the right people. So, it certainly would create some stress, especially if you were, you know, in a fatigue setting, in a fatigue mode.

As far as relationships go, I can't tell you the number of times I had to leave my children's athletic events, growing up, over the years, or school performances, or miss them altogether, because of being on call and having something happen as a result.

It required a lot of times, for you, if you were with your mate, going out, to take two separate cars, because you didn't want to leave them stuck someplace. (See Tr., September 29, 2003, pp. 127-128.)

On-call compensation in this case is, in a part, a penalty premium. Such a premium is designed to enforce an accepted standard of traditional working habits and to discourage management from encroaching on the accepted standard, unless it is essential to do so. The Association's proposal does not preclude employees from volunteering to accept work-related intrusions into activities that are social in nature, and employees rationally may elect to volunteer for such on-call assignments in an effort to upgrade skills or to enhance career opportunities in the Bureau. It is important not to lose sight of the purpose of the on-call premium, and it has primarily a nonwage purpose, even though, of course, compensation under the proposal impacts wages.

The proposal has a social purpose of discouraging a willy-nilly use of on-call status. If on-call status is sufficiently important for management to require it, an employee, then, is compensated for having sacrificed uninterrupted freedom with family and friends. Most employees today seek more time for personal, home, community, and cultural life, and it is reasonable to compensate an employee for remaining ready to respond immediately to interruptions. Even some managers believe that being required to respond to a pager should generate such compensation. (See Tr., November 11, 2003, p. 201.)

Internal and external comparability data justify adopting the Association's proposal for on-call pay. All comparable out-of-state cities provide on-call pay at varying levels, except for Cleveland. All in-state comparable communities do so as well, except Gresham. (See City's Exhibit E-F.11, p. 1, and E-F.12, p. 2.) Five of the nine jurisdictions in the local labor market provide on-call pay at various rates, but two of the four not providing such premium pay do not place any employees in on-call status. (See Association's Exhibit No. 5-19.) Within Portland itself, four of the six other bargaining units with which the City negotiates a collective bargaining agreement receive on-call pay at rates comparable to the Association's proposal; and one of the six units makes no use of on-call status and, thus, has no need for such a collective bargaining provision. (See Association's Exhibit No. 5-20.)

An unsettling and enormous difference exists in the parties' costing of the Association's proposal. The Association estimates the cost at $114,712, while the City prices the proposal at $8,765,397 for FY 2004-2005 or at least $4.2 million a year. (See Association's Exhibit 7-62, p. 1; City's Exhibit E-F.17, p. 2; and City's Post-hearing Brief, p. 143.) The huge difference is explained by underlying assumptions used by management to calculate the cost. The Employer assumes that anyone issued a communication device by management qualifies for on-call pay and that all such employees remain on-call for most of their off-duty hours. The Association made clear, however, that management would retain total control over the cost of the proposal by holding absolute discretion over who would be required to carry a pager and be responsible for responding after hours on pain of discipline. The proposal is clear on its face that management retains such unilateral control. Nor did the Employer's costing of the proposal take into account some employees with a pager who are on leave and that others rotate "pager" duties among group members. Additionally, the City insisted that "there is no reason to dispute" a bargaining table estimate made by the Association of those who would be covered by the proposal, despite the fact that the Association later rewrote its proposal to give management total control over the number covered. (See Employer's Post-hearing Brief, p. 143 and Tr., January 22, 2004, p. 197.) Such information supports a conclusion that the Employer's estimated cost of the proposal is not reliable. Nor is the Association's proposal intended to be retroactive, and it is not. (See Tr., November 11, 2003, p. 39.)

It is in the interest and welfare of the public for officers to respond quickly to problems even if they are off-duty, and it also advances the public interest for management to structure the Bureau into what it deems to be an efficient organization. The Association's proposal does not thwart these goals. In fact, the proposal leaves management with "a fail-safe mechanism for control" of all on-call costs. (See, In the Matter of Interest Arbitration between the City of Portland and the Portland Police Commanding Officers Association, December 9, 1995, p. 9.) Management alone decides who is required to respond after hours on pain of discipline, and it is reasonable to believe that some who are not required to respond will do so voluntarily in order to gain greater experience and to help secure promotional opportunities. The Association's proposal is more consistent with comparability data and also advances policies of the Oregon public sector collective bargaining law.

VI. WORKING OUT OF CLASSIFICATION

A. Language of the Association's Last Best Offer

WORKING OUT OF CLASSIFICATION

During routine operations, when an officer within the bargaining unit is assigned temporarily to fulfill substantially all the duties and responsibilities of a classification higher than the officer's own for a period more than three (3) consecutive working daysof one full shift or more, the officer shall be paid regular salary plus 8.25%, or the entrance rate of the higher classification, whichever is higher. If more than one officer is used at different times to fill the same position of the higher class and the position is vacant for more than three (3) consecutive working one full shift or moredays, the officers filling the position will be paid the higher rate for all time worked in the higher class. Whenever an officer is permanently or temporarily assigned as a supervisory sergeant in the Investigations or Criminalist Division, the officer shall be paid for all time so worked at the highest rate paid for Sergeant or Criminalist, plus three percent (3%).

B. Discussion

The Association seeks a change in the "working out of classification" contract article. Employees currently receive "out-of-classification" pay for performing duties in a higher classification only after three consecutive days of being assigned to perform out of classification duties. The Association proposes that "out of classification" pay be triggered after completing one full shift in a higher classification. The proposal in the Last Best Offer is closer to current contract language than positions maintained by the Association in earlier bargaining. In other words, the Association's willingness to compromise its earlier positions on this issue is precisely the sort of conduct Last Best Offer interest arbitration is designed to foster. The legislative hope, of course, is that the parties will move much earlier in the bargaining process and come closer together on most issues. The City, however, had no interest in any sort of change with regard to this issue.

A wage spread in a labor contract typically is based on a job evaluation process. Higher skilled employees receive a wage differential over less skilled employees, and the theory is that lower paid employees will be motivated by the prospect of more compensation to train for a higher level classification. Some employers assign employees to perform higher skilled work on a temporary basis. If an employee in a lower classification is temporarily assigned to a higher classification, theory holds that the reassigned employee is performing a job of relatively greater worth to the organization and often, then, qualifies for compensation at the wage rate of the higher classification. This was the design negotiated into the parties' collective bargaining agreement.

An officer may work out of classification as a sergeant and occasionally as a detective. A sergeant may work out of classification as a lieutenant, but Chief Foxworth made clear that the Bureau does not assign an employee out of classification to work as a criminalist. (See Tr., February 11, 2004, p. 149.) The Association argues that not only is the current rate of pay inequitable compared with relevant comparability data, but also management's application of the system is viewed as unfair in some instances.

Staffing shortages in the Bureau caused management to rely more frequently on "out of classification" assignments. Temporary assignments are usually served with more experienced personnel. Chief Foxworth stated that the general practice is to have a tenured person serve with an individual acting out of classification. (SeeTr., February 11, 2004, p. 151.) Even though permanent employees in the higher classification are usually present to assist someone temporarily in the higher classification, this is not always the case; and the temporary supervisor may find him or herself in situations without experienced supervision immediately available. For example, on at least one occasion in a crisis, a probationary sergeant acting out of classification as a lieutenant was the highest ranked person in the precinct. (See Tr., November 8, 2003, p. 83.)

On being assigned to act out of classification, an employee assumes all major responsibilities for the position except perhaps the duty of obtaining a search warrant or actually imposing discipline for improper conduct. Some acting supervisors, however, counsel officers reporting to them on how to improve performance. (See, e.g., Association's Exhibit 2-49, p. 2.) An individual acting in a higher capacity is addressed with the title of the higher classification and also wears the appropriate insignia. (See Tr., September 12, 2003, pp. 260 and 330.)

Testimony from a variety of witnesses was relatively consistent in stating that an employee temporarily assigned to a higher classification is more than "an absentee person" or a caretaker and assumes full responsibility for the higher position with a commitment to achieving productivity goals. (See City's Post-hearing Brief, p. 150, fn. 498.) An acting supervisor, for example, might make a crucial decision to initiate an Internal Affairs investigation and, thereby, possibly affect an officer's career with profound consequences. (See Tr., September 12, 2003, p. 345.) Likewise, acting supervisors make recommendations while working out of classification that are calculated to foster departmental effectiveness and to increase organizational efficiency. (See, e.g., Association's Exhibit 2-7, p. 3 and 2-18, p. 3.)

Acting sergeants have been responsible for duties as varied as supervising a major crime scene involving a drive-by homicide or mediating complaints with citizens about alleged misconduct of an officer who reports to an acting sergeant. (See Tr., September 12, 2003, pp. 330-331.) An officer who worked out of classification and subsequently was promoted to sergeant testified as follows:

QUESTION: What were your duties as an acting sergeant?

ANSWER: My duty as an acting were - consisted of the same duties I have now. I had a detail, in fact, I managed the same detail, I supervised the same group of officers, completed after actions, authorized overtime, did the same duties I do right now.

QUESTION: Is there anything you do right now, as a permanent sergeant, that you did not do as an acting sergeant?

ANSWER: Not that I can think of. (See Tr., February 16, 2003, p. 168, emphasis added.)

Testimony from those who acted out of classification was reasonably consistent to the effect that higher level duties begin immediately for the person acting out of classification. (See Tr., September 12, 2003, p. 260.)

Moreover, an officer working out of classification is held to a high standard of conduct and can be criminally liable or subject to internal discipline based on his or her performance of duties while acting out of classification. Unrebutted testimony established that acting supervisors have been the subject of internal investigations. (See, Tr., September 12, 2003, p. 310.) At least one acting sergeant received discipline for improperly executing his duties as an acting supervisor, including demonstrating poor judgment by commenting at roll call on an officer's decision to terminate a pursuit. He was warned that any further similar infraction in his role as an acting supervisor could be a basis for termination. (See Association's Exhibit 2-13, p. 2.)

Acting supervisors are not trained for higher level work and must be prepared to make sound judgments immediately. As one officer observed, "Unfortunately, the Bureau doesn't coach you to be an acting sergeant; I mean, they just pluck you out and put you there." (See, Tr., September 12, 2003, p. 349.) Not a shred of evidence suggested that such internal and external risks attach only after an acting supervisor has worked more than three consecutive days in a higher capacity. Since risks of the higher level job are immediate, it is not unreasonable for a higher rate of pay to commence at the end of a full shift in the higher classification.

Another element meriting consideration is the fact that administrative inequities may exist in the present system. Some evidence suggested that from time to time management may feel a need to apply the system legalistically in order to save resources. There was some indication that management on occasion may have worked personnel the maximum time before a higher pay rate was about to be triggered only to bring in another acting supervisor for a new three day stint, making it at least appear that the objective was to avoid paying a higher wage. (See, Tr., September 12, 2003, p. 341.) In one instance, an employee worked continuously as a detective for 18 months and properly received "out of classification" pay. But when his vacation occurred in the midst of that "temporary" assignment, his wages reverted to a lower rate because the system calls for a higher rate only for time actually worked, even though the "out of classification" assignment covered a lengthy period. (See Tr., September 29, 2003, p. 11.)

Additionally, if an employee worked a higher level job on a continuous basis for weeks, his or her pay rate still might fluctuate. Assume, for example, in one of those short-term but continuous assignments, an employee worked Monday, Tuesday, Wednesday as an acting supervisor and, then, took a day of vacation. Having worked no more than three consecutive days in a higher capacity, no higher rate of pay would be applied for the three days. The employee would have interrupted the cycle of out of classification work with a day of vacation and would be required to begin a new period of three consecutive days before qualifying again on the fourth day for a higher rate. (See Employer's Exhibit E-C.17, pp. 1-2, fns. 1,3, and 4 and City's Post-hearing Brief, p. 150, fn. 498.) An individual might also work three days in a higher grade, be assigned on the fourth day as a driving instructor and, then, return immediately to the higher classification, only to be denied a higher rate of pay for that three day period of time. (See Tr., September 29, 2003, pp. 44-45.) There was some indication that at least one precinct repeatedly used a pattern of three days on, one day off, and three days on for acting supervisors. (See, Tr., September 12, 2003, p. 340 and September 13, 2003, p. 168.)

It is unclear from the evidence the extent of any issue with regard to patterns of working out of classification and whether there exists a systemic problem of management's manipulating the current system to save resources. The evidence may point to only a collection of isolated incidents and accounting errors. To the extent the data suggest a pervasive problem, it raises an issue of functional morality. Lapses in functional morality can undermine the health of an organization. Allocating resources within an organization can create moral dilemmas for managers. Attending to organizational imperatives without adhering to the spirit of a bargain can harm the functional morality of an organization. Focusing narrowly and rigidly on organizational effectiveness without regard for the maturity and stability of the spirit of a contractual relationship can jeopardize organizational health. Acting according to the letter of the law may be organizationally justified but not morally defensible in terms of the long-term relationship of the parties.

Some evidence suggested that, with regard to out of classification assignments, management on occasion has measured itself by purely operational criteria. Any public agency spending tax dollars must be inordinately concerned with an efficient performance of organizational systems. At the same time, it is perilous for an organization or an individual to elevate practicality and expediency over functional morality. Organizational values that guide decision-making with regard to assigning acting supervisors ought to be infused with practices that honor the spirit of the bargain between the parties. The spirit of the bargain is that an out of classification work schedule will not be manipulated to avoid paying a higher rate for performing higher skilled duties. It will be easier for the organization to be clear about the fact that it is behaving responsibly with the adoption of the Association's proposal.

Comparability data for this issue provide a mixed picture but, on balance, favor the Association's proposal. Among comparable out-of-state cities, two assign no employees to work in "out of classification" positions, and one does so only rarely. Of those out-of-state cities actively using "out of classification" assignments, all use a minimum threshold of work that activates a higher rate of pay more quickly than Portland's "three consecutive days" rule. All comparable in-state communities are more generous with regard to this issue than the standard followed in Portland. In the local labor market, six of the nine jurisdictions allow a higher rate of pay to be activated more quickly than in Portland. The formula within Portland itself for other bargaining units is more favorable for all but one, and that bargaining unit uses essentially the same formula as the Association. This means that some nonsworn personnel in the Bureau who are represented by another bargaining representative enjoy a more favorable "working out of classification" benefit. This anomaly will continue even under the Association's proposal. In sum, the comparability data support the Association's proposal.

The City attributes a far higher cost to the Association's proposal than does the Association. According to the City, the proposal in 2003-04 will cost $90,736. (See City's Exhibit E-C.10.) The Association costed the proposal at $1,985 a year. (See Association's Exhibit 7-63, p. 5.) It is possible that the Association's cost calculation is not entirely accurate. (See City's Post-hearing Brief, pp. 152-53, fn. 508.) The City's calculation is also flawed in that it included wages for criminalists, but Chief Foxworth never assigns officers to work out of a classification as criminalists due to the complexity of the work. (See Tr., February 11, 2004, p. 139.) Nor is it management's practice to fill temporary absences of detectives even up to two weeks with an "out-of-classification" assignment. (See Tr., February 11, 2004, p. 150.) Thus, the City's cost projection for the Association's proposal is not accurate. It is clear from both cost estimates that the proposal is not a major cost item in the wage package.

Even with adoption of the Association's proposal, it, of course, remains a management right to allocate work and to make assignments. The Association's proposal in no way intrudes on this right of management and merely states a threshold pay rate once management exercises its unilateral right to assign an employee to work out of classification. It also remains within the purview of management to design its own system for initially making such assignments and to specify that only designated personnel are authorized to determine if such an assignment is necessary. In other words, the proposal includes "a failsafe mechanism for control" of any attendant costs and gives management "a reasonable basis for predicting and budgeting" for such expenditures. (See In the Matter of Interest Arbitration between the City of Portland and the Portland Police Commanding Officers Association, p.9 (December 9, 1995).)

VIII. THE ISSUE OF PRISONER TRANSPORT

A. Language of the Last Best Offers

1. The City's Offer

Transport of Prisoners. Officers transporting prisoners shall receive not more than eight (8) hours' pay per day while en route compensation for all time on the assignment. Such time shall be compensated at straight time, unless such service is performed on a holiday or the officer's normal day off. Expenses to cover actual costs of meals, lodging and transportation will be allowed officers while transporting prisoners.

2. The Association's Offer

Transport of Prisoners. Officers transporting prisoners shall receive not more than eight (8) hours' pay per day while en route. Such time shall be compensated at straight time, unless such service is performed on a holiday or the officer's normal day off. Expenses to cover actual costs of meals, lodging and transportation will be allowed officers while transporting prisoners.

B. A Threshold Dispute: Jurisdiction

The parties disagree about the appropriate rate of pay for time employees spend transporting prisoners. Without regard to the merits of the Last Best Offers, the City believes the arbitrator has no authority to evaluate proposals of the parties for this issue. The parties allegedly reached a tentative agreement on pay for transporting prisoners, and there is nothing for the arbitrator to decide, according to the City. In fact, the City filed an Unfair Labor Practice complaint against the Association and asked the Oregon Employment Relations Board to vindicate management's viewpoint. (See Association's Exhibit No. 8-10.)

Issues before the Oregon Employment Relations Board, however, are not before the arbitrator and are not within the arbitrator's purview to decide. The arbitrator makes no determination regarding whether the Association refused to recognize or repudiated a tentative agreement. Nor does the arbitrator decide whether the Association violated Oregon law by submitting a new issue in its Last Best Offer. Finally, it is not the role of the arbitrator to determine whether legally impermissible bad faith bargaining occurred with regard to this issue. The question before the arbitrator is whether there is an unresolved issue needing to be decided as a part of this proceeding.

ORS 243.746(4) draws the boundaries of an interest arbitrator's jurisdiction. It states:

Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussion looking to a new agreement or amendment of the existing agreement, unresolved mandatory subjects submitted to the arbitrator in the parties' last best offer packages shall be decided by the arbitrator. (Emphasis added.)

The law is clear that an arbitrator is to review "unresolved" mandatory subjects in the parties' Last Best Offer packages, and such unresolved disputes "shall be decided" by the arbitrator. The law requires that mandatory subjects covered in a Last Best Offer which separate negotiating parties and about which they have been unable to reach a firm decision shall be determined by a lawfully designated interest arbitrator. It is an arbitrator's statutory duty to provide a formal resolution of such unresolved matters.

Objective evidence in this case makes clear that the issue of prisoner transport pay is an unresolved mandatory subject of bargaining. The parties bargained about the topic, and each submitted it to the arbitrator as an element of the respective Last Best Offers. The arbitrator has a statutory duty to be guided by any stipulations of the parties, and the City argues that a tentative agreement, in effect, removed this proposal from the arbitrator's jurisdiction. With such an assertion, it, of course, became the City's burden to prove that the issue of pay for transporting prisoners is now resolved between the parties and that they reached agreement on the matter after submitting Last Best Offers to the arbitrator. Accordingly, it is necessary to review in detail the parties' bargaining history with regard to this issue to determine whether this issue is resolved or unresolved.

In 1971, the parties adopted Article 38(83) into their collective bargaining agreement. It stated:

Officers transporting prisoners shall receive not more than eight hours pay per day while en route. Such time shall be compensated at straight time, unless such service is performed on a holiday or the Officer's normal day off. Expenses to cover actual costs of meals, lodging, and transportation will be allowed Officers while transporting prisoners. (See Association's Exhibit No. 4-15, p. 15.)

Until negotiations for the 2004 contract, the parties never modified the "Transport of Prisoners" article, despite a decision in 1985 by the United States Supreme Court that influenced the relevant contract provision.

In 1976, the U.S. Supreme Court held that applying provisions of the Fair Labor Standards Act to state and local governments constituted a violation of the tenth amendment. Nine years later, the Court reversed itself and held in a 5-4 decision that nothing in the Minimum Wage and Overtime provisions of the Fair Labor Standards Act violated any constitutional provision. (See Garcia v. San Antonio Transit Authority,469 U.S. 528 (1985).) Congress promptly passed the 1985 Fair Labor Standards Amendments to the 1938 legislation. These amendments permitted state and local government employers to substitute compensatory time off for the mandatory overtime provisions of the Fair Labor Standards Act, eliminated volunteers and state and local legislative employees from coverage, and minimized employers' liability for unpaid wages prior to April 15, 1986 (the effective date of the Amendments.) Knowledge of these events affected proposals at the bargaining table for this contract.

Early in bargaining the Association proposed in February, 2002 that the "transport of prisoners" article be changed. The Association proposed:

Officers transporting prisoners shall receive not more than eight (8) hours' pay per day while en route (sic) compensated for all time spent on the assignment. Such time shall be compensated at straight time, unless such service is performed on a holiday or the officer's normal day off. Expenses to cover actual costs of meals, lodging and transportation will be allowed officers while transporting prisoners.(See Joint Exhibit No. 7, pp. 34-35.)

Over a year later by May of 2003, the parties remained in disagreement on this issue; and the Association submitted its proposal on this issue in a Final Offer package to the City. It stated:

Officers transporting prisoners shall receive not more than eight (8) hours' pay per day while en route (sic) compensated for all time spent on the assignment. Such time shall be compensated at straight time, unless such service is performed on a holiday or the officer's normal day off. Expenses to cover actual costs of meals, lodging and transportation will be allowed officers while transporting prisoners. (See Joint Exhibit No. 5, p. 14.)

The two proposals from the Association are identical. Both refer to "time spent on the assignment" and call for compensation at a straight time rate.

In the ensuing months, the City's bargaining team changed its members; and the parties continued to negotiate by mail on the subject of prisoner transport pay. Several months later on July 15, 2003, the City wrote the Association to ask:

Article 43.12 (Prisoner Transport): what does the term "the assignment" mean? Is the PPA proposing that the member be compensated even if he or she is completely free from any prisoner oversight responsibility (for example, during a meal break, or sleeping hours when an overnight trip is required?) (See Association's 4-7, p. 2.)

Several weeks later on August 8, 2003, the Association answered the City's inquiry by stating:

Prisoner Transport, Part 1. You request that the PPA indicate how many bargaining unit members and what classification and rate of pay will be eligible for the PPA's proposal. You also ask the basis for the assumption that the PPA's proposal would be implicated by "12 occurrences per year," and that there would be two hours of overtime per occurrence. (Harper, August 1, 2003). The PPA's estimate was reached by multiplying the average hourly salary cost, plus 10% "rollup" costs, provided to the PPA by the City during bargaining, by 1.5 and in turn multiplying the result by 2, and in turn multiplying the result by 12. The PPA is assuming that its proposal will impact bargaining unit members on the same basis as the general breakdown of classifications within the PPA's bargaining unit, making the use of the average hourly salary cost appropriate. The PPA's estimate that its proposal would be implicated 12 times per year was produced through the joint experience of the members of the PPA's negotiating team.

* * *

Prisoner Transport. Part 2. You request that the PPA define the term "assignment" as used in this article. (Harper/Kraut, July 15, 2003). The term "assignment" includes all time that the officer has prisoner oversight responsibilities. With respect to the specific examples provided in your letter, an officer would only be entitled to compensation during a meal break occurring outside of the officer's normal shift if the officer was required to guard the prisoner during the meal break. The same analysis would apply with respect to sleeping hours when an overnight trip is required. (See Association's Exhibit 4-8, pp. 9-10.)

The City continued the dialogue by correspondence on August 21, 2003 and stated:

Prisoner Transport

Thank you for the explanation.

We understand the PPA proposal to mean that compensation for prisoner transport will be consistent with the Fair Labor Standards Act. If the City's understanding is accurate, then the City proposes that the parties consider this language change to be tentatively agreed to. Please confirm. (SeeAssociation's Exhibit 4-9, p. 1, emphasis added.)

Several days later the Association sent the following response:

Prisoner Transport. You indicate that we may have a tentative agreement on this issue, stating that the City understands the PPA proposal to mean that compensation for prisoner transport will be consistent with the FLSA. The PPA is proposing that prisoner transport time be treated for compensation purposes in a fashion similar to any other work PPA members perform. Under some circumstances, that will mean that prisoner transport time is treated identically to how it would be treated under the FLSA; in other circumstances it will result in a treatment more generous than the FLSA. (See Association's Exhibit 4-10, p. 1, emphasis added.)

At this juncture, the City wrote the Association and made the following pronouncement:

This correspondence between the parties set forth all the elements of a classic common law "offer-acceptance" dispute. In February of 2002, the Association made an offer to the City. In May, 2003, the Association renewed its offer. In July of 2003, the City asked for clarification of the offer; and the Association provided more specific details. On August 21, 2003, the City wrote to obtain further clarification and, in the process, made a counteroffer to the Association. The City proposed that the language offered by the Association be restricted in accordance with requirements of the Fair Labor Standards Act. The offeror had not included this restriction in the original offer, and the power of acceptance extended only to the original offer. The City violated the "mirror image" rule.

The "mirror image" rule continues to define an appropriate manifestation of assent to an offer. Acceptance must be unconditional and not vary terms of the offer, and any variance becomes a counteroffer. The City stated its willingness to accept the Association's original offer only if the offer was interpreted to be consistent with the Fair Labor Standards Act. The offeree, however, interpreted the offer to include the possibility of treatment more generous than that provided by the Fair Labor Standards Act. The City's interpretation of the original offer was restrictive and constituted a counteroffer, and the counteroffer by the Employer terminated the City's power of acceptance of the original offer. The offeror did not submit an offer that permitted a choice of options for the City, and the offeree, then, was limited either to accepting the offer on the Association's terms or losing the power of acceptance. The City responded with a counteroffer, and the Association rejected the counteroffer, and restated its original offer.

The City now asserts that it accepted the offer and that its attempted acceptance on August 29 of the Association's original offer also included an acceptance of the Association's expansive interpretation of the offer. But nothing in the City's attempted acceptance renounced the limiting language in its counteroffer or rejected its earlier restrictive interpretation of the original offer. In fact, the attempted acceptance continued to make reference to the restrictive term set forth in its counteroffer. At best, the City injected ambiguity into the "offer-acceptance" process and now seeks to impose the consequences of such ambiguity on the offeree. But the Association remained the master of its offer, and the City terminated its power of acceptance by varying the terms of the original offer. It is more reasonable to view the City's conduct on August 21 as making a counteroffer, which the Association never accepted. The Association immediately rejected the City's counteroffer that limited the proposal in all circumstances to Fair Labor Standards Act requirements. The original offer contained no FLSA cap, and the City sought unsuccessfully to add that term to the bargain.

The Employer also failed to prove that, with regard to the proposal on prisoner transport pay, the parties agreed to vary their usual method of reaching tentative agreements. The alleged tentative agreement in this case is not signed nor initialed by both parties, and it is their usual practice to do so. As the City's chief spokesperson testified:

QUESTION: When we looked through these documents and Exhibit 118 that are tentative agreements, there appears to be a format that the parties used for tentative agreements that indicates the assent of each side to the document; and that is initialing and dating of the tentative agreement. Is that the format that was used by the parties for the tentative agreements?

ANSWER: That's accurate.

QUESTION If something was not signed--signed, initialed, and dated by the chief spokesperson for each side, it wasn't a tentative agreement. Correct?

ANSWER: That's correct. (See Tr., January 21, 2004, pp. 111-112.)

The totality of the record makes clear that prisoner transport pay continues to be an unresolved mandatory subject of bargaining. It is an issue submitted to the arbitrator in the Last Best Offer packages. No tentative agreement or stipulation removed the issue, and it is appropriate for the arbitrator to include an examination of it as a part of reviewing the Last Best Offer packages on which the arbitrator must make a determination.

C. Discussion on the Merits

The Association costed this proposal at $976 annually. The City offered no estimated cost. The parties battled over the legality of the Association's proposal, but the arbitrator focused only on whether it is a matter within the ambit of the arbitrator's authority.

Comparability data favor the Association's proposal. The Employer proposed to compensate officers who transport prisoners at straight time, without regard to the length of an assignment. It is the position of the Association that the Fair Labor Standards Act would define all time spent transporting prisoners as "hours worked," and the Association believes such time must be treated like all other work time in accordance with the parties' collective bargaining agreement. According to unrebutted evidence, all out-of-state cities follow a practice of paying employees who transport prisoners in the same manner used to pay all other work. This same pervasive practice exists among both in-state comparable communities as well as within the labor market, except in Multnomah County. In Multnomah County the practice is varied. In sum, the data support adoption of the Association's proposal.

IX. Vehicle Use Fee

A. Language of the Association's Last Best Offer

VEHICLE USE AND CARE

An officer assigned to active motorcycle duty will be permitted to garage the officer's assigned City motorcycle at home, provided the officer's place of residence is within thirty (30) minutes' travel time of the Traffic If an officer is required to take a City vehicle home as part of a job assignment, the City shall not assess the officer any fees for the use of the vehicle unless required to do so by the Internal Revenue Code or the regulations enacted thereunder. Washing and maintenance service of the vehicle will be done during regular duty time.

B. A Review of Selected Points

The Association proposes to change the status quo so that, if management requires an employee to take home a vehicle as part of his or her job, the City will not charge a "vehicle use" fee unless required to do so by Internal Revenue Service rules or regulations. The City currently is charging $3 a day or $60 a month to bargaining unit members authorized to take home a vehicle. It is the belief of the City that the Association's proposal provides special treatment for members of this particular work group. Employees taking home city vehicles may be driving more than a million miles a year, and the Employer has a legitimate interest in being certain that costs and benefits of the program are distributed equitably and in the best interest of the public. (See Association's Exhibit 3-12, p.1)

Shortly before the parties commenced interest arbitration, the City objected to eliminating the "vehicle use" fee because of inconsistencies its elimination would create with Internal Revenue Service rules or regulations. The Employer stated:

I recently became aware of a potential problem with the PPA's proposal under Article 40.1 that would eliminate usage fees for take-home vehicles, and I want to alert you to it. The City cannot "waive" usage fees for certain take-home vehicles because that would be inconsistent with the Internal Revenue Code and IRS regulations. (See Association's Exhibit 3-21, emphasis added.)

Subsequently, the City specified five IRS regulations which it believed prohibited management from waiving charges for take-home vehicles. (See Association's Exhibit 3-29.)

In its post-hearing brief, however, the Employer explained that its objection to the Association's proposal is not linked to any concern with IRS regulations, stating that "the monthly charge is not tied to the Internal Revenue Code or regulations" and noting that the "City Council expressly deleted the reference to the Internal Revenue Service Code in August 2002." (See City's Post-hearing Brief, p. 161, fn. 538; and City's Exhibit E-D 1.) Although the parties devoted considerable hearing time to the relevance of IRS rules and regulations, the City no longer contends that legal constraints prevent it from implementing the Association's proposal but, rather, that internal equity argues against the Association's request because it calls for what the Employer views as special treatment.

Evidence submitted to the arbitrator indicates that the amount of the fee being charged bargaining unit members is not high and is roughly equivalent to the cost of a monthly bus pass. (See City's Exhibit E-D.11, p. 1.) In other words, it is not unreasonable per se. As of April 2002, a total of 192 city employees took home a city vehicle. Of the 192 employees, 121 of them worked in public safety. Of the 192, the City charged a vehicle use fee to 110 employees. Of the 110 employees charged a fee, 105 were employed in fire and police bureaus. Of the public safety personnel taking home a city vehicle, management charged a fee to 87% of them. Of nonpublic safety personnel in the same circumstances, management charged a fee to 7% of them. The Employer, however, discounts the Association's conclusions.

The City recognizes that both parties benefit from employees taking home a city vehicle, but it is the contention of the City that, if the Take-Home Vehicle Report dated April 23, 2003 is used, it shows that only 34% of bargaining unit members reimbursed the City with a "vehicle use" fee. (See City's Post-hearing Brief, p. 162 and Employer's Exhibit E-D 16, p. 2.) Data on which the Association relied for its percentages are also "muddied" by the fact that some work groups rotate "on-call" duties, and this fact may affect take-home "vehicle use" calculations. Some bureaus report such "rotation" data, and others do not. Combining rotation and nonrotation data may distort percentages of employees who actually reimburse the City with a "vehicle use" fee. It is the conclusion of the City that the most recent data show members of this bargaining unit reimbursing the City at a percentage lower than any other work group in the city. (See City's Exhibit E-D.16, p. 2, fn. 2.) The percentages changed considerably by adding 32 motorcycles and 8 canine units, which management has done. (See City's Exhibit E-D.16, p. 3.) The Association never adequately responded to the City's new data.

While data about internal equities are ambiguous, external comparability data strongly favor the Association's proposal. In all comparable out-of-state cities, no "vehicle use" fee is charged employees. In all in-state comparable communities, no "vehicle use" fee is charged employees. In the local labor market, no "vehicle use" fee is charged employees.

It is important to remember that management retains total control over employees taking home city vehicles. On August 28, 2002, the Portland City Council adopted Ordinance No. 176878; and it states:

Requests for authorizations to drive City vehicles to and from work must be approved by the employee's bureau manager and the employee's Commissioner In Charge. (See City's Exhibit E-D 1, p. 3.)

Pursuant to Resolution 34485 passed in November of 1988, a process is in place to collect data and to report vehicle use patterns to the Bureau of General Services. The proposal of the Association makes clear that, if management exercises its unilateral prerogative to require an employee to take home a vehicle as part of a job assignment, the City may not assess a "vehicle use" fee unless IRS rules and/or regulations impose such a requirement. Management has in place mechanisms to detect problems and to maintain oversight of benefits and burdens of the existing policy. The Association's proposal does not disrupt these processes.

X. THE ISSUE OF DEATH LEAVE

A. Language of the Association's Proposal

Up to three days shall be allowed an officer without deduction in pay by reason of the death of a member of the officer's immediate family. With the approval of the Chief of Police or his/her designee, an additional three days leave with no deduction in pay may be allowed for necessary funeral travel time. If the death is of the officer's spouse or child, the Chief shall have the discretion to approve up to a total of thirty (30) days of paid death leave, including the leave described elsewhere in this article. The Chief's decision shall be final, and shall not be subject to the grievance procedure.

B. Discussion of Selected Points

Currently, employees who experience the death of an immediate family member qualify for three days of paid leave. The Chief may extend the leave to six days. The Association proposes that, if an officer's spouse or child dies, the Chief in his or her sole discretion shall have authority to grant up to 30 days of paid leave. The Chief's decision would not be subject to review in the parties' negotiated grievance procedure.

It is the belief of the Employer that the Association seeks special treatment for members of its bargaining unit and that the proposal is not supported by the evidence. In a traditional interest arbitration system, the Association's proposal probably would not be adopted. This response in no way diminishes the anguish and grief caused by the death of a spouse or child. It is clear from the record that some bargaining unit members have suffered deeply from such experiences. No doubt, because a police officer's life is more uncertain than most, a death in his or her circle of nearness makes it particularly hard to bear.

The problem is that neither internal nor external comparability data strongly support the Association's proposal. It is premised primarily on functional morality. While such a source of guidance is exceedingly useful, the balance of advancing healthy organizational values and maintaining equitable policies argues against adoption of the proposal. Even though the Association contends that comparable cities give management the discretion to extend such leave, the important point is that they do so only in practice. The Association wants it codified in the parties' agreement. Whether or not activity rises to the level of a past practice in labor/management relations is far more speculative than interpreting and applying an express contractual provision. At the same time, the proposal is a part of the Association's Last Best Offer package. Since the vast majority of the Association's proposals merit adoption, this part of the package, by law, must become a part of the next agreement.

The proposal's saving grace is that the horrific events covered by the proposal occur rarely. It is also true that more leave than three days after such a traumatic event is in the public interest. In view of a police officer's individual discretionary authority, it is essential that he or she be undistracted and emotionally calm while performing law enforcement duties. This proposal advances that goal. Nor is it a costly item. The City's estimated cost of the proposal in 2003-04 is $7,414, and the Association projects a cost of $2,407. (See City's Exhibit E-B.4, p. 1, and Association's Exhibit 7-63, p. 4.) The City assumed more personnel would qualify and would request such leave than did the Association. Under either estimate, however, the costs are minimal; but benefits to the public could be significant.

It is somewhat disingenuous to suggest that such leave is "entirely discretionary with the Police Chief." (See Tr., March 31, 2004, p. 37.) Nor is it a complete picture to argue that the Chief's decision cannot be grieved in the contractual grievance procedure. The Chief must consider not only needs of an individual employee but the morale of the entire Bureau, and denying a request in such devastating circumstances could be

demoralizing for all. On the other hand, granting such a request could thereafter plunge the Chief into the necessity of painstakingly reviewing nuances of every case in order to assure an even-handed and equitable application of administrative discretion.

In the Association's favor is the fact that current leave practices are ambiguous in the face of a spouse's or a child's death. It is not clear from the evidence whether a healthy employee may use catastrophic leave to assist a small child in the event of a spouse's death. The Association's proposal would permit the Chief to review each case and determine that it better serves the Bureau in a particular instance if a completely healthy employee is permitted to remain at home with a small child who is having major difficulty adjusting to the loss of a parent.

While in a traditional interest arbitration system, this proposal might have been modified or rejected, the overwhelming vortex of the Association's total package as well as the law reasonably pull it into the parties' collective bargaining agreement. Chief Foxworth summarized it best when he said:

I think the death of a spouse or a loved one or a child is traumatic, it's emotional, it's devastating. Regardless if you're a police officer or if you're someone who works in the Bureau of Maintenance or Parks and Recreation or someone who works at a bank, it's devastating. (See Tr., February 11, 2004, pp. 174-175.)

It is sensible to give the Chief considerable latitude when an employee is dealing with such a traumatic event. Given the low cost projection of the proposal and the potentially significant benefit to the entire Bureau, it is not unreasonable for this proposal to become a part of the parties' agreement.

XI. A FINAL ISSUE

A. Discussion

The law states in ORS 243.746(5) that:

The arbitrator shall select only one of the last best offer packages submitted by the parties and shall promulgate written findings along with an opinion and order. (Emphasis added.)

On its selection, a Last Best Offer package becomes an instrument of government and carries the force of law. It is not permissible for an arbitrator to adopt a partial package, even if no record is made for parts of it. Several proposals received no attention by either party in the hearings and were not the subject of a stipulation but, nevertheless, are a part of the Association's Last Best Offer.

These proposals have been evaluated and are adopted based on a review of statutory criteria and the totality of evidence submitted in the case. Some proposals are basically deletions based on other provisions in the Association's Last Best Offer. Other proposals are stylistic changes and designed to implement or streamline existing contractual language so that it is consistent with major provisions in the Association's Last Best Offer. The remaining proposals have been set forth as the residue.

B. The Residue

ARTICLE 20.5

LOST OR DAMAGED PROPERTY

Employees who intentionally or negligently lose or damage City property are subject to discipline consistent with the terms of the collective bargaining agreement.

ARTICLE 26.5.2

UNUSED SICK LEAVE IN THE EVENT OF DEATH

Unused Sick Leave in the Event of Death. The City will pay a lump sum cash payment equal to one hundred percent (100%) of unused sick leave to the surviving dependents of any officer who dies prior to retirement. If the ordinance, statute, or rules for calculating the death benefit of a member of either the Fund or the PERS are amended to include the value of unused sick leave; (sic) this section will be amended to assure that double recovery does not occur.

ARTICLE 55.2

ALTERNATIVE SHIFT SCHEDULES

No later than three months after the execution of this Agreement, the City and the Association agree to form a committee to study alternative shift schedules. The City and the Association shall appoint three members each to the committee. The City shall provide the committee with reasonable resources to study the matter of alternative shifts. Within six months from the date it first convenes, the committee shall make a non-binding recommendation to the Chief of Police on shift schedules.

ARTICLE 58.2, VESTS

58.1 Vests.

58.2.1 The City shall furnish protective vests to each officer.

58.2.2 The vests provided by the City must meet or exceed the recommended standards set by the Safety Committee. If the Safety Committee is unable to decide this matter, However, the final decision will be left to the Chief of Police or the Chief's designee. However, the vest provided by the bureau must meet or exceed the ballistic threat level of bureau-issued sidearm ammunition for day to day use by patrol officers.

58.2.3 Vests shall be replaced by the City in accordance with the manufacturer's recommended replacement schedule or when the vest fails, is damaged, or is rendered non-usable. If an officer desires to upgrade a vest before the vest is due to be replaced, the officer shall be responsible for paying the entire cost of the upgraded vest.

58.2.4 If an officer chooses to purchase his/her own vest, and if the City approves of the vest for use on duty, the City shall issue the officer a chit or purchase order in the amount the City pays for the vest it most commonly issues to its officers. If the additional cost of the vest is due to the vest not fitting the officer, the City shall pay the entire cost of the vest. Disputes as to whether an issued vest fits shall be resolved by a recommendation from the Safety Committee. If the Safety Committee is unable to decide this matter, However the final decision will be left to the Chief of Police or the Chief's designee.

Upon separation from employment, officers shall return to the City vests the City has provided. If the City requests that an officer return a vest provided under section 58.2.4, above, the City shall reimburse the officer for any additional cost of the vest paid by the officer in excess of the chit or purchase order issued by the City.

ARTICLE 64.1.1

RECRUITMENT AND RETENTION INCENTIVES

Based upon a bona fide recruitment need, the Bureau may appoint a currently certified law enforcement officer to Police Officer at up to the three-year step if approved by the Director of the Bureau of Human Resources. Initial appointment above the three-year step may be made only with the approval by ordinance of the City Council.

ARTICLE 64.2 VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATION

64.2 VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATION (VEBA). The City shall allow officers to participate in a Plan(s) which is defined to include a Voluntary Employee Beneficiary Association (VEBA), a Section 457 plan or any other form of non-qualified deferred compensation program.

64.2.1 Pursuant to Article 64.2, the PPA has established a retirement Medical trust (the PPA VEBA Trust) for the purpose of proiding for the payment of life, sick, accident or other benefits to its members.

64.2.2 The PPA VEBA Trust has received tax-exempt status from the Internal Revenue Service under Section 501(c)(9) of the Internal Revenue code.

64.2.3 For every officer who is a member under the Fire & Police Disability & Retirement (FPD&R) system under Chapter 5 of the City Charter, the City shall, upon that officer's retirement from the City, contribute to the PPA VEBA Trust to the credit of the officer and on a pre-tax basis, an amount equal in value to 100% of the payments that would otherwise be paid to the member for unused sick leave under Article 26 of the parties' collective bargaining agreement.

64.24 For every officer who is covered under the FPD7R retirement system, the City shall, upon that officer's retirement, deposit into the account of the officer in a Plan or Plans a maximum of 100% of the unused sick leave which is currently cashed out under Article 26 at the time of the officer's retirement, as well as all vacation leave which is currently cashed out under Article 25 at the time of the officer's retirement and any compensatory time off cashed out under this Agreement.

64.25 The amount of unused leave credits to be deposited into the Plan or Plans upon retirement under Article 64.2.1 above shall be established periodically by each officer and will be documented in writing on a form specified for that purpose. The documentation shall specify what portion of each type of unused leave credits (sick, compensatory time off or vacation) shall be deposited into the Plan or Plans. Should no selection be made by June 1, the amount established by the officer for the previous year shall remain in place for the subsequent Fiscal Year.

64.2.6 An officer who is covered under the Public Employees Retirement System (PERS), and who signs a commitment to retire in a specific calendar year, shall be allowed to cash out their unused vacation leave in one lump sum. An officer who elects how to have unused vacation leave cashed out upon retirement must do so in writing at least two weeks prior to retirement. No cash payment will be made prior to the officer's actual retirement.

64.2.7 For every officer who is covered under PERS, the City shall, upon that officer's retirement, deposit into the account of the officer in a Plan or Plans a maximum of 100% of unused vacation leave which is currently cashed out under Article 25 at the time of the officer's retirement and any compensatory time off cashed out under this Agreement.

64.2.8 The amount of unused leave credits to be deposited into the Plan or Plans upon retirement under Article 64.2.4 above shall be established periodically by each officer and will be documented in writing on a form specified for that purpose. The documentation shall specify what portion of each type of unused vacation leave credits shall be deposited into the Plan or Plans. Should no selection be made by June 1, the amount established by the officer for the previous year shall remain in place for the subsequent Fiscal Year.

64.2.9 The Association may make contributions to the Plan or Plans on behalf of its members. In addition, individual members may make contributions to the Plan or Plans.

64.2.10 If at any time during the operation of the Plan or Plans it is determined that (1) deposits may not be made on a pre-tax basis or (2) that plan earnings are not tax-exempt or (3) payments from the Plan or Plans are not tax exempt or if participation in the Plan or Plans or operation of the Plan or Plans is in violation of any federal or state law or regulation, then in that event the parties agree to negotiate a substitute provision in order to carry out the original intention of the Agreement.

64.2.11 In order to participate in the Plan or Plans described above; each individual officer will be required to sign a waiver agreement acceptable to the City and the Association.

64.1.`1 The provisions of Article 64 of this collective bargaining Agreement, as well as the entire Voluntary Employee Beneficiary Association Plan (VEBA) in which the membership of the Association participate, shall be the subject of a IRS Private Letter Ruling to be requested by the City. The Request shall include but not be limited to a request for an IRS determination as to whether the provisions of Article 64 and the VEBA plan qualify the plan as a Qualified Employee Benefit Trust under laws and regulations of the Internal Revenue Code, thereby conferring on the plan and its participants the intended tax advantages anticipated from participating in the VEBA. The Request shall also seek a ruling concerning the federal income tax consequences under section 451 of the Internal Revenue Code. The Request shall include questions as to whether the election to cash out unused vacation leave in a lump sum as set forth in Section 64.2.3, the inclusion of compensatory time as set forth in section 64.2.1 and 64.2.4, and the contributions by the Association as set forth in Section 64.2.8, create taxable income for the participant or their beneficiaries using the cash receipts and disbursements method of accounting under the economic benefit doctrine and the constructive receipt doctrine of section 451 of the Internal Revenue Code.

64.2.13 If a Private Letter Ruling is issued on the plan set forth in this Article, the Ruling shall be included in this Labor Agreement with no further action required other than a Letter of Agreement signed by the Association President, the Director of the Bureau of Human Resources and approval as to form by the City Attorney's Office.

64.2.14 The Association will pay a pro rata share of the cost of obtaining the Private Letter Ruling.

ALL OTHER PROVISIONS

The PPA is proposing that all other provisions be resolved on the basis of the tentative agreements reached by the parties in negotiations or, if no tentative agreement, on the basis of existing contract language.

AWARD

Having carefully considered all evidence and arguments submitted by the parties in the matter and based on statutory criteria prescribed in ORS 243.746(4), the arbitrator selects the Association's Last Best Offer package in this matter as the next agreement between the parties. It is so ordered and awarded.